•L  ^  ,A  }       \      \  ^ 


? 

• 


• 


the  fifth  edition  of  a  book  so  well  known  In  the  commercial  world  as  '  Gilbart's 
Treatise  on  Banking,'  we  need  My  little  beyond  announcing  its  appcarniu •<•.  It  has  the 
advantage  of  a  doaen  additional  yean  of  experience  on  the  part  of  the  author  In  banking 
and  monetary  matter*,  and,  M  a  consequence,  the  bulk  of  the  matter  is  increased.  An 
elaborate  Index  alto  materially  improves  the  convenience  of  the  book  for  purpose!  of 
refereaea." 

••  This  book  is  designed  to  be  awful  to  the  public  at  large,  by  circulating  that  kind  of 
Information  which,  as  it  becomes  more  widely  diffused,  will  tend  to  prevent  a  recurrence 
of,  those  evtla  that  have,  in  too  many  instances,  resulted  from  the  bad  administration  of 
>  feme  of  oar  banking  institutions." — London  Morning  CkronieU,  Oct.,  1850. 

•"Mr.  Gilbert 'i  works  on  Banking  hare  attained  a  jnst  celebrity.  Plain  and  practical, 
they  are  suitable  to  the  character  and  position  of  the  writer,  and  to  the  wants  and  inclina- 
tions of  the  banking  and  mercantile  community,  for  whom  they  are  chiefly  intended. 
They  are  not,  however,  without  much  interest  for  every  inquiring  mind,  while  for  statesmen 
and  political  economists  they  are  sources  of  much  useful  and  even  indispensable  informa- 
tion. The  present  work  treats  of  banking  as  an  art.  and  its  merits  have  already  been 
recognised.  The  principal  characteristic  of  Mr.  Gilbert's  book  is,  practical  common  sensu, 
a  doe  subordination  of  all  the  parts  of  the  subject,  so  that  none  has  an  undue  prom 
which,  bciSK  joined  with  a  perspicuous  style,  accounts  for  the  favor  bis  works  have  de 
•ervedly  met  with." — London  Eeonomitt. 

"The  work  is  divided  into  sections,  which  may  be  briefly  described  as  o.n.p 
complete  description  of  a  sound  system  of  Bank  Book-keeping;  an  account  of  UK 
required  from  the  offiqprt  in  a  bank;  general  instruction*  relating  to  (he administration 
•  of  a  bank,  with  reference  to  il»  ordinary  business,  during  a  time  of  pre*!»ur<  . 
the  operation  of  the  new  banking  laws  introduced  during  the  last  few  years." — 
MHsWJfi 


PRACTICAL   TREATISE 


*  V 

ON 


./    BANKING. 

4 

BT 

JAMES  WILLIAM  GILBART,  F.  R.  S., 

GENERAL  MANAGER  OF  THE  LONDON  AND  WESTMINSTER  BANK. 


"  The  best  banking  system  may  be  defeated  by  imperfect  management;  and,  on  the  other  hand,  the 
evils  of  an  imperfect  banking  system  may  be  greatly  mitigated,  if  not  overcome,  by  prudence,  caution, 
and  resolution." — Report  of  the  Committee  of  the  Souse  of  Lords  on  the  Causes  of  Commercial 
Distress,  1848. 


THIRD   AMERICAN,  FROM  THE  FIFTH  LONDON  EDITION. 


PHILADELPHIA: 
G.    D.     MILLER,     PUBLISHER, 

NINTH  STREET,  FIRST  DOOR  ABOVE  CHESTNUT. 


hifi 


Pnntad  by  T    K.  fc  P.  O    CoUiM. 


TO 

THE   RIGHT   HON'OEABLE 

LORD  MONTEAGLE,  F.  R   S., 

COMPTROLLER   GENERAL   OF   HER  MAJESTY'S   EXCHEQUER,  ETC.,    ETC.,    ETC., 
WHO,   AS 

A   DIRECTOR  OF   THE    PROVINCIAL  BANK  OF   IRELAND, 

CHANCELLOR   OF   THE   EXCHEQUER, 

AND  AS 
FRAMER   OF   THE   REPORT   OF   THE   COMMITTEE   OF   THE    HOUSE    OF   LORDS, 

APPOINTED   TO   INQUIRE   INTO 

THE    CAUSES   OF   THE   COMMERCIAL  DISTRESS   OF   1847, 
DISPLAYED   A   PROFOUND   KNOWLEDGE   OF   THE   PRINCIPLES 

OP 
PRACTICAL    BANKING, 

3Tfus  OTorit 

IS,   WITH  PERMISSION,   RESPECIEULLY  DEDICATED, 

BT 

THE   AUTHOR. 


f 

• 


fb 
* 


PREFACE  BY  THE  AUTHOR 


"  The  best  security  against  management  of  banking  affairs  must  ever  be  found  in  the  capacity  and 
integrity  of  those  who  are  intrusted  with  the  administration  of  them,  and  in  the  caution  and  prudence 
of  the  public ;  but  no  legislative  regulation  should  be  omitted  which  can  increase  and  insure  the  sta- 
bility of  establishments  upon  whiuh  commercial  credit  so  much  depends." — Speech  from  the  Throne 
in  1837. 


IN  the  preface  to  flay  "  History  and  Principles  of  Banking,"  I  made  the  follow- 
ing remarks : — 

"Banking  is  both  an  art  and  a  science.  As  an  art,  it  is  a  branch  of  trade  inti- 
mately connected  with  every  man's  business  ;  as  a  science,  it  forms  an  important 
portion  of  political  economy.  The  knowledge  of  banking  as  an  art,  is  acquired 
like  that  of  other  arts,  by  serving  an  apprenticeship,  or  engaging  practically  in 
its  operations.  The  knowledge  of  banking  as  a  science,  may  be  acquired,  like 
that  of  other  sciences,  by  reading,  observation,  and  reflection.  These  two 
branches  of  knowledge  do  not  always  accompany  each  other.  Some,  who  are 
practically  engaged  in  banking,  do  not  study  its  principles;  while  those  who 
have  written  upon  its  principles,  have  for  the  most  part  been  political  econo- 
mists and  statesmen,  who  were  unacquainted  with  its  practical  details.  This 
publication  will  perhaps  be  thought  worthy  of  some  degree  of  attention  upon 
the  ground  that  it  professes  to  be  a  scientific  work,  written  by  a  practical  man." 

The  present  work  professes  to  treat  of  banking  as  an  art.  "  Art  is  the  appli- 
cation of  knowledge  to  a  practical  end."*  The  practical  end  of  banking,  as  of 
all  other  trades  and  professions,  is  to  get  money.  This  book  treats  of  the  means 
by  which  that  tod  is  obtained,  points  out  the  rules  to  be  followed,  and  the  errors 
to  be  avoided,  shows  how  these  rules  are  applied  by  various  banking  institutions, 
and  in  different  districts  of  the  United  Kingdom,  exhibits  the  qualifications  neoes- 

*  Sir  John  HerscheL 


Viii  nUFACK 

•ary  to  the  party  by  whom  these  rales  are  administered,  and  describes  those  moral 
virtues  which  are  as  indispensable  as  professional  knowledge  to  the  attainment  of 

It  may  be  supposed,  that  in  discussing  the  "  effects  of  the  Act  of  1844,"  and 
"  the  Laws  of  the  Currency,"  I  have  wandered  beyond  the  limits  of  practical 
banking.  Bat  these  matter*  are  viewed  only  in  their  practical  results.  The  prin- 
ciples of  banking  are  deductions  from  facts.  The  science  of  banking  is  a  collec- 
tion of  these  principles.  It  is  of  importance  to  have  a  correct  notion  of  the  nature 
of  this  science.  In  the  physical  sciences,  as  in  chemistry  and  electricity,  we  often 
discover  a  principle,  and  then  apply  it  to  a  practical  end.  But  in  banking,  and  in 
political  economy,  generally,  we  first  collect  our  facts,  and  then  ascend  from  facts 
to  principles.  Hence  books,  in  which  are  described  the  practical  operations  of 
banking,  and  the  actual  results  of  legislative  enactments,  furnish  the  materials 
which  enable  us  to  arrive  at  sound  principles. 

There  are  several  classes  of  persons  to  whom  I  think  this  book  may  be  more 
particularly  useful. 

The  first  class  includes  those  public  men  who  have  occasion  to  write  or  to  speak 
upon  our  banking  institutions.  Statesmen,  authors,  and  reviewers,  however  cor- 
rect may  be  their  knowledge  of  banking  as  a  science,  often  fall  into  mistakes  when 
they  attempt  to  describe  its  practical  operations.  Although  it  must  be  admitted 
that  the  principles  of  banking  may  be  well  understood  without  any  acquaintance 
with  details,  yet  it  is  equally  true  that  if  a  public  man  have  acquired  a  competent, 
degree  of  practical  information,  his  opinions  will  carry  greater  weight,  and  he  will 
be  less  liable  to  fall  into  erroneous  conclusions.  They,  especially,  who  are  desirous 
of  altering  the  constitution  of  our  banking  establishments  should  be  anxious  not  to 
weaken  the  force  of  their  recommendations  by  making  misstatements  as  to  matters 
of  fact  .  The  public  have  a  right  to  expect  that  they  who  attempt  to  improve  a 
system  should  be  well  acquainted  with  the  system  they  attempt  to  improve. 

The  second  class  are  those  who  are  practically  engaged  in  banking  operations. 
Those  directors  of  our  joint-stock  banks,  who  may  have  been  appointed  chiefly  on 
account  of  their  high  character  and  local  influence,  may  derive  from  this  work 
some  practical  information,  which  will  assist  them  in  the  discharge  of  their  official 
duties.  Young  men,  too,  who  occupy  subordinate  stations  in  our  banking  estab- 
lishments, may  here  acquire  those  enlarged  views  that  will  qualify  them  for  higher 
appointments.  One  object  of  this  work  is,  to  aid  the  formation  of  good  practical 
bankers.  Even  to  experienced  bankers,  books  on  banking  are  useful,  not  only  from 
the  information  they  impart,  but  from  the  impressions  they  produce,  and  the  recol- 
lections they  awaken.  In  banking,  as  in  morals,  we  often  go  astray,  more  from 
want  of  firmness  than  from  want  of  knowledge.  We  have  all  need  to  be  reminded 
•f  the  importance  of  a  steady  adherence  to  sound  principles.  And  the  more 


BY   J.    W.    GILBART.  IX 

*  ^  *T 

frequently  the  right  path  is  pointed  out  to  us,  the  less  likely  are  we  to  wander  into 
those  which  are  forbidden. 

The  shareholders  in  joint-stock  banks  are  a  class  to  whom  the  subject  must  be 
of  the  deepest  interest.  Upon  the  wise  administration  of  their  respective  banks 
will  depend  the  amount  of  their  dividends  and  the  safety  of  their  capital.  This 
.  book  professes  to  show  in  what  way  this  wise  administration  may  be  secured. 
Shareholders  may  here  learn  how  to  judge  of  the  conduct  of  their  directors,  and 
(what  is  of  no  less  importance)  how  to  regulate  their  own. 

To  all  persons  who  "keep  bankers,"  it  must  be  useful  to  know  by  what  rules 
bankers  manage  their  business.  They  will  thus  be  able  to  conduct  their  account 
so  as  to  give  satisfaction  to  their  banker.  And  they  will  be  able  to  judge  how  far 
be  may  be  disposed  to  grant  them  such  assistance  as  they  may  occasionally  require. 
A  large  number  of  persons,  especially  in  London,  have  not  yet  discovered  the  ad- 
vantage of  keeping  a  banker.  They  imagine  that  banks  are  merely  places  in  which 
the  opulent  deposit  their  superfluous  riches.  The  perusal  of  this  work  will  be  suffi- 
cient to  show  that  the  advantages  of  banking  are  not  confined  to  the  wealthy. 

I  do  not  know  that  I  can  promise  much  amusement,  except  to  those  who  find 
amusement  in  the  pursuit  of  knowledge.  Banking  is  considered  a  dry  subject. 
So  are  all  subjects  until  they  are  understood.  I  think  I  may  say,  that  neither  in 
the  matter,  nor  in  the  style,  will  my  readers  find  anything  here  which  they  cannot 
understand.  They  who  wish  only  for  such  a  general  acquaintance  with  banking, 
as  in  the  present  day  every  man  of  education  is  expected  to  possess,  may  read  the 
first  hundred  and  thirty  pages,  omitting  the  third,  fifth,  twelfth,  thirteenth,  and 
fourteenth  sections.  They  may  then  consult  their  own  taste  as  to  whether  they 
will  read  any  other  portions  of  the  work.  Should  they  do  no  more  than  this,  they 
will  obtain  as  much  knowledge  of  practical  banking  as  they  will  probably  require 
for  the  purposes  of  general  society,  even  in  the  company  of  bankers. 

This  book  is  designed  to  be  useful  to  the  public  at  large,  by  circulating  that  kind 
of  information,  which,  as  it  becomes  more  widely  diffused,  will  tend  to  prevent  a 
recurrence  of  those  evils  that  have  in  too  many  instances  resulted  from  the  bad 
administration  of  some  of  our  banking  institutions.  To  give  useful  information 
to  the  public  has  been  the  aim  of  this  and  of  all  my  other  works.  When  this  book 
first  appeared,  there  existed  no  other  publication  that  described  in  detail  the  inte- 
rior operations  of  a  bank.  I  am  happy  to  say,  that  since  that  period  several  valua^ 
ble  works  of  a  similar  kind  have  been  published.  And  we  are  now  presented 
monthly,  in  the  "Bankers'  Magazine,"  with  excellent  articles  on  practical  banking, 
written  chiefly  by  practical  bankers. 

The  first  edition  of  this  work  was  published  in  May,  1827 ;  the  second  in  January, 
1828;  the  third  in  December,  1834;  and  the  fourth  in  October,  1836.  In  the  be- 
ginning of  the  year  1847,  I  determined  to  publish  a  new  edition;  but  before  I  had 


x  nutfACK  BT  J.  w. 

prepared  it  for  publication  the  pressure  came,  and  Parliamentary  Committees  were 
appointed  to  inquire  into  the  causes  of  the  distress.  My  position  required  that  I 
should  make  myself  acquainted  with  the  evidence  given  before  those  committees. 
I  wrote  out  my  reflections  on  tome  portion!  of  this  eridence,  and  have  embodied 
them  in  the  present  work.  Hence  one  cause  of  the  increased  size  of  the  book,  and 
»f  the  delay  which  has  attended  its  publication.  This  edition  has  the  advantage 
of  an  elaborate  Index,  the  uses  of  which  are  pointed  out  in  the  last  section  of  the 
gaoont  part. 

I  have  been  so  long  known  as  a  writer  on  banking,  and  my  writings  have  met 
with  so  muck  acceptance,  that  it  is  not  necessary  I  should  enumerate  any  claims  I 
may  be  supposed  to  have  on  public  attention.  But  there  is  one  claim  that  gathers 
strength  by  time,  that  is,  experience.  And  in  publishing  a  new  edition  of  a  prac- 
tical work,  it  may  not  be  inappropriate  to  state,  that  it  is  now  upwards  of  thirty- 
six  years  since  I  first  engaged  in  the  business  of  banking,  And  I  ha^ve  been  above 
twenty-two  years  a  manager.  I  am  thankful  to  acknowledge,  that  during  those 
twenty-two  years  I  have  not  had  one  unsuccessful  year. 

J.  W.  G. 
lama,  Suly  <O,  1848. 


• 


*„ 


PART  FIRST.— OF  PRACTICAL  BANKING. 

BEOTIDS  PAGB 

I.    THE  NATURE  OF  BANKING 1 

II.    THE  UTILITY  OF  BANKING 2 

III.    BANKING  TERMS 8 

V.    THE  GENERAL  ADMINISTRATION  OF  A  BANK        .        .        12 
V.    THE  ADMINISTRATION  OF  A  BANK  WITH  REGARD  TO  PRO- 
CEEDINGS ON  BILLS  OF  EXCHANGE    ....       28 
VI.    THE  ADMINISTRATION  OF  A  BANK  WITH  REGARD  TO  THE 

EMPLOYMENT  OF  ITS  SURPLUS  FUNDS       ...        41 
II.    THE  ADMINISTRATION  OF  A  BANK  DURING  A  SEASON  orf 

PRESSURE .52 

VIII.    THE  ADMINISTRATION  OF  A  BANK  UNDER  THE  ACT  OF  1844    61 
IX.    THE  ADMINISTRATION  OF  THE  BANKING  DEPARTMENT  OF 

THE  BANK  OF  ENGLAND 82 

X.    THE  ADMINISTRATION  OF  JOINT-STOCK  BANKS,  WITH  AN 

INQUIRY  INTO  THE  CAUSES  OF  THEIR  FAILURES    .        .    99 

XL    THE  ADMINISTRATION  OF  THE  OFFICE  .        .        .      126 

XII.    BANKING  BOOK-KEEPING        .   •    .       .       .       .       .  150 

XIII.  BANKING  CALCULATIONS *      184 

XIV.  BANKING  DOCUMENTS     .        .        .       :       .       •  •    .  202 

•1*  J 


Zli  CONTENTS. 

PART  SIOOND.--OF  BANKING  INSTITUTIONS. 

I.  THX  BANK  or  ENGLAND 233 

II.  THE  LONDON  PRIVATE  BANKERS          ....  249 

m.  THE  JOINT-STOCK  BANKS  IN  LONDON     .               .  .  259 

IV.  THE  COUNTRY  PRIVATE  BANKS           ....  284 

V.  THE  COUNTRY  JOINT-STOCK  BANKS        «               .  800 

VI.  THE  BANKS  or  SCOTLAND           .       .       •  811 

VII.  THE  BANKS  or  IRELAND        .       .       .       .       .  .352 

VIII.  THE  MORAL  AND  RELIGIOUS  DUTIES  or  BANKING  COMPA- 
NIES       ;     '  «  -""   • 387 

IX.  TEN  MINUTES'  ADVICE  ABOUT  KEEPING  A  BANKER  .  424 

X.  INDEX  BEADING 431 


APPENDIX. 

THE  BANK  OP  FRANCE      *.'.,...  .  433 

BANKS  or  THE  UNITED  STATES 440 

INDEX  .  .  443 


A  PRACTICAL  TREATISE 

ON 

BANKING. 


PART  L  —  OF  PRACTICAL  BANKING. 


SECTION  L  — THE  NATURE  OF  BANKING. 

"  WHAT  is  it  that  we  call  a  Banker  ?  There  is  in  this  city  a  company 
or  corporation  called  goldsmiths,  and  most  of  those  called  bankers  are  of 
that  corporation ;  but  so  far  as  I  know,  there  is  not  a  company  or  corpo- 
ration in  England  called  bankers,  nor  has  the  business  any  definition  or 
description,  either  by  common  law  or  by  statute.  By  custom,  we  call  a 
man  a  banker  who  has  an  open  shop,  with  proper  counters,  servants,  and 
books,  for  receiving  other  people's  money,  in  order  to  keep  it  safe,  and 
return  it  upon  demand  ;  and  when  any  man  has  opened  such  a  shop  we 
.call  him  a  banker,  without  inquiring  whether  any  man  has  given  him 
money  to  keep  or  no ;  for  this  is  a  trade  where  no  apprenticeship  is  re- 
quired, it  having  never  yet  been  supposed  that  a  man  who  sets  up  the 
trade  of  banking  could  be  sued  upon  the  statute  of  Queen  Elizabeth, 
which  enacts,  that  none  shall  use  any  art  or  mystery  then  used,  but  such 
as  have  served  an  apprenticeship  in  the  same."  (Speech,  delivered  in 
the  House  of  Commons,  in  1746.  See  the  London  Magazine  for  that 
year,  p.  120.) 

The  term  bank  is  derived  from  lanco,  the  Italian  word  for  bench,  as 
the  Lombard  Jews  in  Italy  kept  benches  in  the  market-place,  where  they 
exchanged  money  and  bills.  When  a  banker  failed,  his  bench  was  bro- 
ken by  the  populace ;  and  from  this  circumstance  we  have  our  term  bank- 
rupt. 

A  banker  is  a  dealer  in  capital,  or,  more  properly,  a  dealer  in  money. 
He  is  an  intermediate  party  between  the  borrower  and  the  lender.  He 
borrows  of  one  party  and  lends  to  another ;  and  the  difference  between 
the  terms  at  which  he  borrows  and  those  at  which  he  lends,  forms  the 

A  1 


A   TVtoffM  On  Hanking. 

«ouree  of  his  profit.  By  this  means  he  draws  into  active  operation  those 
small  sums  of  money  which  were  previously  unproductive  in  the  hands  of 
private  individuals;  and  at  the  same  time  furnishes  accommodation  to 
those  who  have  need  of  additional  capital  to  carry  on  their  commercial 


Banks  have  been  divided  into  private  and  public.  A  private  bonk  is 
that  in  which  there  are  but  few  partners,  and  these  attend  personally  to  its 
management  A  public  bank  is  that  in  which  there  are  numerous  part- 
ners, and  they  elect  from  their  own  body  a  certain  number,  who  are  in- 
trusted with  its  management.  The  latter  arc  usually  called  joint-stock 
bMibm 

The  business  of  banking  consists  chiefly  in  receiving  deposits  of  money, 
upon  which  interest  may  or  may  not  be  allowed  ;  in  making  advances 
of  money,  principally  in  the  way  of  discounting  bills  ;  and  in  effecting 
the  transmission  of  money  from  one  place  to  another.  Private  banks  in 
metropolitan  cities  are  usually  the  agents  of  the  bonks  in  the  provinces, 
and  charge  a  commission  on  their  transactions.  In  making  payments, 
many  country  banks  issue  their  own  notes. 

The  disposable  means  of  a  bonk  consist  of,  First,  the  capital  paid  down 
by  the  partners,  or  shareholders.  Secondly,  the  amount  of  money  lodged 
by  their  customers.  Thirdly,  the  amount  of  notes  they  are  able  to  keep 
out  in  circulation.  Fourthly,  the  amount  of  money  in  the  course  of  trans- 
mission, that  is,  money  they  have  received,  and  are  to  repay,  in  some  dis- 
tant  place,  at  a  future  time. 

These  disposable  means  are  employed,  First,  in  discounting  bills.  Sec- 
ondly, in  advances  of  money  in  the  form  of  cash  credits,  loans,  or  over- 
drawn accounts.  Thirdly,  in  the  purchase  of  government  or  other  secu- 
rities. Fourthly,  a  part  is  kept  in  tne  banker's  till,  to  meet  the  current  de- 
mands. Of  these  four  ways  of  employing  the  capital  of  a  bank,  three  are 
productive,  and  one  is  unproductive.  The  discounting  of  bills  yields  in- 
terest ;  the  loans,  and  the  cash  credits,  and  the  overdrawn  accounts,  yield 
interest  ;  the  government  securities  yield  interest  ;  the  money  in  the  till 
yields  no  interest. 

The  expenses  of  a  bank  may  be  classified  thus  :  rent,  taxes,  and  repairs 
of  the  house  in  which  the  business  is  carried  on  ;  salaries  of  the  officers  ; 
stationer's  bill  for  books,  paper,  notes,  stamps,  ozc.  ;  incidental  expenses, 
as  postages,  coals,  &c. 

The  profits  of  a  bank  are  that  portion  of  its  total  receipts,  —  including 
discount,  interest,  dividends,  and  commission,  —  which  exceeds  the  amount 
of  the  expenses. 


»B*TIO!»  H.—  THE  UTILITY  OF  BANKING. 

IN  the  first  place,  banks  arc  useful  as  places  of  security  for  the  deposit 
of  money.  The  circumstance  which  gave  rise  to  the  business  of  banking 
In  this  country  was  a  desire  on  the  part  of  the  merchants  of  London  to 

I 


The  Utility  of  Banking. 

obtain  a  place  where  they  might  lodge  their  money  in  security.  Every 
one  who  has  had  the  care  of  large  sums  of  money  knows  the  anxiety 
which  attends  their  custody.  A  person  in  this  case  must  either  take  care 
of  his  money  himself  or  trust  it  to  his  servants.  If  he  take  care  of  it  him- 
self, he  will  often  be  put  to  inconvenience,  and  will  have  to  deny  himself 
holidays  and  comforts,  of  which  a  man  who  is  possessed  of  much  money 
would  not  like  to  be  deprived. 

If  he  intrust  it  to  others,  he  must  depend  upon  their  honesty  and  their 
ability.  '  And  although,  in  many  important  cases,  a  master  is  compelled 
to  do  this,  yet  he  does  not  feel  the  same  satisfaction  as  if  the  money 
was  actually  under  his  own  care.  Some  instances  of  neglect  or  of  dis- 
honesty will  necessarily  occur,  and  these  will  occasion  suspicion  in  ref- 
erence to  other  parties  against  whom  no  suspicion  ought  to  be  enter- 
tained. Besides,  in  both  these  cases  the  money  is  lodged  under  the  own- 
er's own  roof,  and  is  subject  to  thieves,  to  fire,  and  to  other  contingen- 
cies, against  which  it  is  not  always  easy  to  guard. 

All  these  evils  are  obviated  by  means  of  banking.  The  owner  of 
money  need  neither  take  the  charge  of  it  himself  nor  trust  to  his  de- 
pendants. He  can  place  it  in  the  hands  of  his  bankers.  They  are 
wealthy  men,  and  are  responsible  to  him  for  the  amount.  If  they  are 
robbed,  it  is  no  loss  to  him  ;  they  are  pledged  to  restore  to  him  the  amount 
of  his  deposit  when  he  shall  require  it.  Whenever  he  wants  money  he 
has  only  to  write  an  order  or  draft  upon  his  banker,  and  the  person  to 
whom  he  is  indebted  takes  the  draft  to  the  bank,  and,  without  any  hesita- 
tion or  delay,  receives  the  money. 

2.  The  bankers  allow  interest  for  money  placed  in  their  hands. 

By  means  of  banking,  the  various  small  sums  of  money  which  would 
have  remained  unproductive  in  the  hands  of  individuals,  are  collected  into 
large  amounts  in  the  hands  of  the  bankers,  who  employ  it  in  granting  facil- 
ities to  trade  and  commerce.  Thus  banking  increases  the  productive 
capital  of  the  nation.  At  the  origin  of  banking,  "the  new-fashioned 
bankers,"  as  they  were  called,  allowed  a  certain  rate  of  interest  for 
money  placed  in  their  hands.  The  banks  of  Scotland  carrj  this  practice 
to  the  greatest  extent,  as  they  receive  upon  interest  so  low  an  amount 
as  ten  pounds ;  and  also  allow  interest  on  the  balance  of  a  running 
account.  Many  of  the  country  bankers  in  England  allow  interest  on 
the  balance  of  a  running  account,  and  charge  commission  on  the  amount 
of  the  money  withdrawn.  The  London  bankers  generally  do  not  allow 
interest  on  deposits,  but  neither  do  they  charge  commission.  All  their 
profits  are  derived  from  the  use  of  their  customers'  money.  The  banks 
of  Scotland  do  not  charge  commission,  although  they  allow  interest  on 
deposits ;  but  then  those  banks  have  a  profit  by  the  issue  of  their  notes. 
The  London  bankers  do  not  issue  notes. 

3.  Another  advantage  conferred  upon  society  by  bankers  is,  that  they 
make  advances  to  persons  who  want  to  borrow  money.     These-  advances 
are  made,  by  discounting  bills,  upon  personal  security,  or  upon  the  joint 
security  of  the  borrower  and  two  or  three  of~  his  friends,  and  sometimes 
.upon  mortgage.     Persons  engaged  in  trade  and  commerce  are  thus  en- 
abled to  augment  their  capital,  and  consequently  their  wealth.     The  in- 

3 


A  Treatise  on  Banking. 

crease  of  money  in  circulation  stimulates  production.  When  bhnkers  nre 
compelled  to  withhold  their  usual  accommodation,  both  the  comm<  n  inl  and 
the  agricultural  interests  an-  plunged  into  exlreme  distress.  The  great 
advantage  arising  to  a  neighbourhood  from  tho  cstahli-hin.  ut  of  a  hank, 
is  derived  mainly  from  the  additional  supplies  of  money  :iil\:mri-d  in 
the  form  of  loans  or  discounts  to  the  inhahitants  of  tho  place.  This 
principle  is  so  well  understood  in  Scotland,  that  hranch  I>,UI'KS  nrc  sunie- 
times  established  in  poor  districts,  with  a  view  of  obtaining  a  future  profit 
from  the  prosperity  which  the  bank  uill  introduce.  (Evidence  i 
the  Select  Committee  of  the  House  of  Commons  upon  the  Abolition  of 
Sm.-i'.I  Notes,  p.  -13.) 

4.  Another  benefit  derived  from  Iwmkers  is,  that  they  transmit  money 
from  one  part  of  the  country  to  another. 

is  scarcely  a  person  in  business  who  has  not  occasion  sometimes 
to  send  money  to  a  distant  town.  But  how  is  this  to  be  done  ?  He  can- 
not send  a  moose n^e.r  with  it  on  purpose;  that  would  be  too  exp< : 
He  cannot  send  it  by  j»ost ;  that  would  be  too  hazardous.  Besides,  the 
sum  may  be  some  fraction  of  a  pound,  and  then  it  cannot  go  By  post. 
The  post,  too,  takes  a  considerable  time,  as  three  letters  at  least  must  pass 
<>n  the  transaction.  If  he  live  in  London  he  may  obtain  a  hank  post  bill, 
but  he  cannot  obtain  that  in  the  country ;  and  he  may  not  be  able  to  ob- 
tain it  in  London  for  the  exact  sum  he  wants.  How,  then,  is  the  money 
to  be  sent  ? 

Every  country  banker  opens  an  account  with  a  London  banker.  If, 
then,  a  person  live  at  Penzance,  and  wants  to  send  a  sum  of  money  to 
Aberdeen,  he  will  pay  the  money  into  the  Penzance  bank,  and  his  friend 
will  receive  it  of  the  Aberdeen  bank.  The  whole  transaction  is  this. 
The  Penzance  bonk  will  direct  their  agent  in  London  to  pay  the  money 
to  the  London  agent  of  the  Aberdeen  hank,  who  will  be  duly  advised  of 
the  payment  A  small  commission  charged  by  the  Penzance  bank,  and 
the  postages,  constitute  all  the  expenses  incurred,  and  there  is  not  the 
least  risk  of  loss. 

Commercial  travellers,  who  are  collecting  money,  derive  great  advan- 
tage from  the  banks.  Instead  of  carrying  with  them,  throughout  the 
whole  of  their  journey,  all  the  money  they  have  received,  when  perhaps 
it  may  be  wanted  at  home,  they  pay  it  into  a  bank,  by  whom  it  is  remit- 
ted with  the  greatest  security  and  at  little  expense  ;  and  they  are  thus  de- 
livered from  an  encumbrance  which  would  have  occasioned  great  care 
•  and  anxiety. 

5.  Wherever  a  bank  is  established,  the  public  are  able  to  obtain  that 
denomination  of  currency  which  is  best  adapted  for  carrying  on  the  com- 
mercial operations  of  the  place.     In  a  town  which  has  no  bank,  a  person 
may  have  occasion  to  use  small  notes,  and  have  none  but  large  ones ;  and 
at  other  times  he  may  have  need  of  large  notes,  and  not  be  able  to  obtain 
them.     Burwhere  a  bank  is  established  there  can  be  no  difficulty  of  this 
kind.     The  bank  issues  that  description  of  notes  which  the  receivers  may 
require,  and  are  always  ready  to  exchange  them  for  others  of  a  different 
denomination.     Banks,  too,  usually  supply  their  customers  and  the  neigh- 
bourhood with  silver ;  and  if,  on  the  other  hand,  silver  should  be  too 

4 


The  Utility  of  Banking. 
:i  i 

abundant,  the  banks  will  receive  it,  either  as  a  deposit  or  in  exchange  for 
their  notes.  Hence,  where  banks  are  established,  it  is  easy  to  obtain 
change.  This  is  very  convenient  to  those  who  have  to  pay  large  sums  in 
wages,  or  who  purchase  in  small  amounts  the  commodities  in  which  they 
trade. 

6.  By  means  of  banking  there  is  a  great  saving  of  time  in  making  mon- 
ey transactions. 

How  much  longer  does  it  take  to  count  out  a  sum  of  money  in  pounds, 
shillings,  and  pence,  than  it  does  to  write  a  draft.  And  how  much  less 
trouble  is  it  to  receive  a  draft  in  payment  of  a  debt,  and  then  to  pay  it  into 
the  banker's,  than  it  is  to  receive  a  sum  of  money  in  currency.  What  in- 
conveniences would  arise  from  the  necessity  of  weighing  sovereigns. 
What  a  loss  of  time  from  disputes  as  to  the  goodness  or  badness  of  partic- 
ular pieces  of  money. 

Besides  the  loss  of  time  that  must  necessarily  occur  on  every  transac- 
tion, we  must  also  reckon  the  loss  which  every  merchant  or  tradesman  in 
an  extensive  line  of  business  would  certainly  sustain  in  the  course  of  a 
year,  from  receiving  counterfeit  or  deficient  coin,  or  forged  notes.  From 
all  this  risk  he  is  exempt  by  keeping  a  banker.  If  he  receive  payment 
of  a  debt,  it  is  in  the  form  of  a  draft  upon  his  customer's  banker.  He 
pays  it  into  his  own  banker's,  and  no  coin  or  bank  notes  pass  through  his 
hands.  If  he  draw  bills,  those  bills  are  presented  by  his  banker ;  and  if 
his  banker  take  bad  money  it  is  his  own  loss. 

7.  A  merchant  or  tradesman  who  keeps  a  banker,  saves  the  trouble  and 
expense  of  presenting  those  bills  or  drafts  which  he  may  draw  upon  his 
customers,  or  which  he  may  receive  in  exchange  for  his  goods.     He  pays 
these  into  the  hands  of  his  banker,  and  has  no  further  trouble.     He  has 
now  no  care  about  the  custody  of  his  bills ;  no  anxiety  about  their  being 
stolen ;  no  danger  of  forgetting  them  until  they  are  overdue,  and  thus  ex- 
onerating the  indorsers  ;  no  trouble  of  sending  to  a  distance  in  order  to 
demand  payment.     He  has  nothing  more  to  do  than  to  see  the  amount 
entered  to  his  credit  in  his  banker's  books.     If  a  bill  be  not  paid,  it  is 
brought  back  to  him  on  the  day  after  it  falls  due,  properly  noted.     The 
banker's  clerk  and  the  notary's  clerk  are  witnesses  ready  to  come  forward 
to  prove  that  the  bill  has  been  duly  presented,  and  the  notary's  ticket  at- ' 
tached  to  the  bill  assigns  the  reason  why  it  is  not  paid.     But  if  any  in- 
dorser  of  the  bill  has  given  a  reference  in  case  of  need,  that  is,  if  any  in- 
dorser  has  written  on  the  back  of  the  bill  that  some  other  party  will  pay  it 
in  case  the  accepter  does  not,  then  the  notary  takes  the  bill  to  the  referee, 
and  procures  the  money  from  him. 

This  circumstance  alone  must  cause  an  immense  saving  of  expense  to 
a  mercantile  house  in  the  course  of  a  year.  Let  us  suppose  that  a  mer- 
chant has  only  two  bills  due  each  day.  These  bills  may  be  payable  in 
distant  parts  of  the  town,  so  that  it  may  take  a  clerk  half  a  day  to  present 
them.  And  in  large  mercantile  establishments  it  would  take  up  the  whole 
time  of  one  or  two  clerks  to  present  the  due  bills  and  the  drafts.  The 
salaries  of  these  clerks  are  therefore  saved  by  keeping  an  account  at  a 
banker's.  Besides  the  saving  of  expense,  it  is  also  reasonable  to  suppose 
that  losses  upon  bills  would  sometimes  occur  from  mistakes  or  over- 

A*  5 


A   Treatut  on  Banking. 

sights,  from  miscalculation  as  to  tho  time  n  bill  would  become  due,  from 
ftfffon  in  marking  it  up,  from  forget  fu  I  ness  to  present  it,  or  from  present- 
ing it  at  tho  wrong  house.  In  these  cases,  the  indorse™  and  the  draw- 
ers, are  exonerated  ;  and  if  the  accepter  do  not  pay  the  bill,  the  amount  is 
lo»t.  In  a  banking-house  such  mistakes  are  not  so  likely  to  occur,  though 
they  do  occur  sometimes  ;  but  the  loss  falls  upon  the  banker,  and  not  upon 
his  customer. 

8.  Another  advantage  from  keeping  a  banker  in  London  is,  that  by 
this  means  you  have  a  continual  referee  as  to  your  respectability.     If  a 
mercantile  house  in  the  country  write  to  their  agent,  to  ascertain  the  re- 
spectability of  a  firm  in  London,  the  first  inquiry  is,  Who  is  their  banker? 
And  when  this  is  ascertained,  the  banker  is  applied  to  through  the  proper 
channel,  and  he  gives  his  testimony  as  to  the  respectability  of  his  custom- 
er.    When  a  trader  gives  his  bill,  it  circulates  through  the  hands  of  many 
individuals  to  whom  lie  is  personally  unknown  ;  but   if  the  bill  is  made 
payable  at  a  banking-house,  it  bears  on  its  face  a  reference  to  a  party  to 
whom  the  accepter  is  known,  and  who  must  have  some  knowledge  of  his 
character  as  a  tradesman.     This  may  be  an  immense  advantage  to  a  man 
in  business,  as  a  means  of  increasing  his  credit ;  and  credit,  Dr.  Franklin 
says,  is  money. 

9.  The  keeping  an  account  at  a  banking-house,  enables  a  trader  not 
only  to  give  a  constant  reference  as  to  his  own  respectability,  but  it  also 
enables  him  to  ascertain  the  respectability  of  other  persons  who  keep 
bankers.     There  are  numerous  cases  in  which  a  trader  may  wish  to  know 
this.     A  stranger  may  bring  him  a  bill,  and  want  goods  in  exchange  ;  or 
he  may  have  drawn  a  bill  upon  a  customer,  and  wishes  to  ascertain  if  this 
bill  would  be  paid  before  he  gave  him  any  further  credit     If  this  bill  is 
not  made  payable  at  a  banking-house,  he  can  obtain  no  information.     But 
suppose  the  bill  is  made  payable  at  a  banking-house ;  even  then  he  can 
obtain  no  information,  unless  he  himself  has  a  banker.     If  he  take  the  bill 
to  the  banker's,  at  whose  house  it  is  made  payable,  and  say,  "  Gentlemen, 
I  will  thank  you  to  inform  me  if  the  accepter  of  this  bill  be  a  respectable 
man.     May  I  safely  give  goods  or  money  in  exchange  for  it?"     They 
will  reply,  "  Sir,  we  never  answer  such  questions  to  strangers."     But  if 

'the  holder  of  this  bill  keep  an  account  at  a  banker's,  he  has  only  to  ask 
his  banker  to  make  the  inquiry  for  him,  and  he  will  easily  obtain  the  most 
ample  information.  Among  nearly  all  the  bankers  in  London,  the  prac- 
tice is  established  of  giving  information  to  each  other  as  to  the  respecta- 
bility of  their  customers,  tor  as  the  bankers  themselves  are  the  greatest 
discounters  of  bills,  it  is  their  interest  to  follow  this  practice ;  and  indeed 
the  interest  of  their  customers  also,  of  those  at  least  who  are  respectable. 

10.  By  means  of  banking,  people  are  able  to  preserve  an  authentic  rec- 
ord of  their  annual  expenditure.     If  a  person  pays  into  his  banker  all  the 
money  he  receives  in  the  course  of  a  year,  and  makes  all  his  payments  by 
checks,  then  by  looking  over  his  bank-book  at  the  end  of  the  year  he  will 
readily  see  the  total  amount  of  his  receipts,  and  the  various  items  of  his 
expenditure.     This  is  very  useful  to  persons  who  have  not  habits  of  busi- 
ness, and  who  may  therefore  be  in  danger  of  living  beyond  their  means. 
It  M  usclesi  to  advise  such  persons  to  keep  an  account  of  their  expenses, 

6 


The   Utility  of  Banking. 

they  will  do  no  such  thing  ;  but  when  short  of  money  at  Christmas,  to  pay 
their  tradesmen's  bills,  they  may  take  the  trouble  of  looking  over  their 
bank-book,  and  noticing  how  many  checks  were  drawn  for  the  purchase 
of  unnecessary  articles.  A  bank  account  is  useful,  also,  in  case  of  disput- 
ed payments.  People  do  not  always  take  receipts  for  money  they  pay  to 
their  tradesmen,  and  when  they  do,  the  receipts  may  become  lost  or  mis- 
laid. In  case  of  death,  or  of  omission  to  enter  the  amount  in  the  credit- 
or's books,  the  money  may  be  demanded  again.  Should  the  payment 
have  been  made  in  bank  notes  or  sovereigns,  the  payer  can  offer  no  legal 
proof  of  having  settled  the  account ;  but  if  the  account  was  discharged  by 
a  check  on  a  banker,  the  check  can  be  produced,  and  the  payment  proved 
by  the  officers  of  the  bank,  who  can  be  subpoenaed  for  that  purpose. 

11.  Another  advantage  resulting  from  keeping  a  banker  in  London  is, 
that  the  party  has  a  secure  place  of  deposit  for  any  deeds,  papers,  or  other 
property  that  may  require  peculiar  care.    Any  customer  who  pleases  may 
have  a  tin  box,  which  he  may  leave  with  his  banker  in  the  evening,  and 
call  for  it  in  the  morning.     In  this  box  he  might  place  his  will,  the  lease 
of  his  house,  policies  of  insurance,  or  any  other  documents  he  wished  to 
preserve  against  fire.     Stock-brokers  and  others,  who  have  offices  in  the 
city  and  live  out  of  town,  have  such  boxes,  which  they  leave  over  night 
with  their  banker,  for  the  sake  of  security,  in  preference  to  leaving  them 
in  their  own  office.     If  a  party  were  going  to  the  country,  he  might  send 
his  plate  or  jewellery  to  his  banker,  who  will  lock  it  up  in  his  strong  room, 
and  thus  it  will  be  preserved  from  fire  and  thieves  until  his  return.     So- 
licitors and  others,  who  have  deeds  or  other  writings  of  importance  left  in 
their  custody,  can  send  them  to  the  bank  during  the  night,  and  thus  avoid 
the  danger  of  fire. 

12.  By  keeping  a  banker,  people  have  a  ready  channel  of  obtaining 
much  information  that  will  be  useful  to  them  in  the  way  of  their  business. 
They  will  know  the  way  in  which  bankers  keep  their  accounts ;  they  will 
learn  many  of  the  laws  and  customs  relating  to  bills  of  exchange.     By 
asking  the  banker,  or  any  of  the  clerks,  they  may  know  which  is  the 
readiest  way  of  remitting  any  money  they  have  to  send  to  any  part 
of  the  country  or  to  the  continent.     If  they  have  to  buy  or  sell  any  stock 
in  the  public  funds,  the  banker  can  give  them  the  name  of  a  respectable 
broker  who  can  manage  the  business  ;  or  should  they  be  about  to  travel, 
and  wish  to  know  the  best  way  of  receiving  money  abroad,  or  be  appoint- 
ed executors  to  a  will,  and  have  to  settle  some  money  matters,  the  banker 
will  in  these  and  many  other  cases  be  able  to  give  them  the  necessary  in- 
formation. 

13.  Banking  also  exercises  a  powerful  influence  upon  the  morals  of  so- 
ciety.    It  tends  to  produce  honesty  and  punctuality  in  pecuniary  engage- 
ments.    Bankers,  for  their  own  interest,  always  have  a  regard  to  the 
moral  character  of  the  party  with  whom  they  deal ;  they  inquire  whether 
he  be  honest  or  tricky,  industrious  or  idle,  prudent  or  speculative,  thrifty 
or  prodigal,  and  they  will  more  readily  make  advances  to  a  man  of  moder- 
ate property  and  good  morals,  than  to  a  man  of  large  property  but  of  in- 
ferior reputation.     Thus  the  establishment  of  a  bank  in  any  place  imme- 
diately advances  the  pecuniary  value  of  a  good  moral  character.     There 

7 


A  Treatise  on  Banking. 

are  numerous  instances  of  persons  having  arisen  from  obscurity  to  wealth, 
only  by  means  of  their  moral  character,  and  tin-  eonfidenee  winch  that 
character  produced  in  the  mind  of  their  l»;m!,<  r.  It  is  not  merely  by  way 
of  loan  or  discount  that  a  banker  serves  such  a  }»  rson  I 
well  of  him  to  those  persons  who  may  make  inquiries  respecting  him  ;  and 
the  banker's  good  opinion  will  In-  the  means  of  procuring  him  a  hi^ln  r 
degree  of  credit  with  the  parties  with  whom  he  trades.  These  effects  are 
easily  perceivable  in  country  towns ;  and  even  in  London,  if  a  house  be 
known  to  have  engaged  in  gambling  or  smuggling  transactions,  or  in  any 
other  way  to  have  acted  discreditably,  their  lulls  will  bo  taken  l>\  tin- 
bankers  less  readily  than  those  of  an  honorable  house  of  inferior  property. 
,  It  is  thus  that  bankers  perform  the  functions  of  public  conservators  of 
the  commercial  virtues.  From  motives  of  private  interest  they  encourage 
the  industrious,  the  prudent,  the  punctual,  and  the  honest,  while  they  dis- 
countenance the  spendthrift  and  the  gambler,  the  liar  and  the  knave. 
They  hold  out  inducements  to  uprightness,  which  are  not  disregarded  by 
even  the  most  abandoned.  There  is  many  a  man  who  would  be  deterred 
from  dishonesty  by  the  frown  of  a  banker,  though  he  might  care  but  little 
for  the  admonitions  of  a  bishop. 


SECTION  III.  —  BANKING  TERMS. 

Query  I.  — Is  the  word  Bank  a  singular  or  a  plural  noun  ? 

The  word  BANK,  being  a  noun  of  multitude,  may  have  verbs  and  pro- 
nouns agreeing  with  it  in  either  the  singular  or  the  plural  number,  yet  not 
without  regard  to  the  import  of  the  term  as  conveying  unity  or  plurality 
of  idea.  In  the  use  of  this  term  the  following  rules  are  usually  ob- 
served: — 

1.  When  any  operation  or  feeling  of  the  mind  is  ascribed  to  a  bank, 
the  verbs  and  pronouns  are  placed  in  the  plural ;  as,  "  The  bunk  were 
anxious  to  meet  the  wishes  of  the  public."     "  The  bank  have  concurred 
in  the  measure  proposed."     "  Are  you  one  of  the  persons  who  tried  the 
question  with  the  Bank  of  Ireland,  whether  they  conceited  themselves 
bound  to  pay  in  gold  at  their  branches  ?  "     "  The  Bank  of  England  pe- 
titioned against  this  bill,  and  were  heard  by  their  counsel ;  but  their  rep- 
resentations produced  no  effect,  and  the  bill  having  passed  through  both 
Houses,  received  the  Royal  assent."     The  following  examples,  wherein 
mental  operations  are  ascribed  to  a  neuter  pronoun,  arc  violations  of  this 
rule  :  —  "  The  bank  allows  the  party  having  the  cash  credit,  to  liquidate 
any  portion  of  his  debt  to  the  bank  at  any  time  that  may  suit  his  cons- - 
nience,  and  reserves  to  itself  the  power  of  cancelling,  whenever  it  shall 
think  Jit,  the  credit  granted."     "  It  is  usual  for  the  bonk  when  it  gives  a 
cash  credit  to  keep  a  watchful  eye  over  the  person  having  that  cash 
credit*1 

2.  When  a  reference  is  made  to  a  bank  merely  as  an  institution,  the 
term  is  considered  to  belong  to  the  singular ;  as,  "  The  Bank  of  Scotland 

8 


Banking  Terms. 

continued  the  only  bank  from  the  date  of  its  establishment,  in  1695,  to 
the  year  1727.  In  that  year  a  charter  of  incorporation  was  granted  to 
certain  individuals  named  therein  for  carrying  on  the  business  of  banking, 
under  the  name  of  the  Royal  Bank ;  and  subsequent  charters  were  grant- 
ed to  this  establishment,  enlarging  its  capital,  which  now  amounts  to  one 
million  and  a  half."  "  The  National  Bank  of  Scotland  has  1,238  part- 
ners." "  If  this  measure  be  carried  into  effect,  the  Provincial  Bank  must 
instantly  be  deprived  of  any  sufficient  means  of  reimbursing  itself  for  the 
heavy  expense  to  which  it  has  been  subject."  "  Has  your  bank  an  es- 
tablishment at  Kirkcudbright  ?  "  "  The  Bank  of  England  has  the  control 
of  its  issues  entirely  within  itself." 

,  3.  When  we  notice  the  rules  or  habitual  acts  of  a  bank,  the  word  be- 
longs to  the  singular ;  as,  "  The  Provincial  Bank  allows  interest  at  the 
rate  of  two  per  cent."  "  The  bank  draws  bills  upon  London  at  twenty- 
one  days  after  date."  "  The  bank  discounts  bills  at  the  rate  of  four  per 
cent."  "  The  bank  issues  notes  payable  in  gold  at  the  place  of  issue." 
"  The  London  and  Westminster  grants  interest  upon  deposits ;  it  does 
not  allow  its  officers  to  receive  Christmas  presents  from  its  customers." 
In  reference  to  cases  that  fall  under  this  rule,  there  is,  however,  some 
contrariety  of  practice:  —  "Do  the  Provincial  Bank  issue  post  bills? 
They  do  not."  "  Have  the  Bank  of  Ireland,  at  their  branch  in  Cork, 
been  In  the  habit  of  receiving  gold  to  any  amount  in  payments  ? " 
"  Have  the  Bank  of  Ireland  any  deposits  at  the  Cork  branch  ?  Do  you 
know  how  their  notes  get  into  circulation  ?  Do  they  pay  any  interest  on 
their  deposits  ?  They  have  a  great  quantity  of  notes  in  circulation*  *— 
have  they  not  ?  " 

4.  When  the  word  bank*  is  connected  with  a  past  participle  by  means 
of  the  neuter  verb  to  be,  it  usually  belongs  to  the  singular  ;  as,  "  I  am  a 
director  of  the  Bank  of  Scotland,  which  is  established  by  act  of  Parlia- 
ment ;  it  does  not  hold  a  charter  from  the  Crown,  but,  in  common  lan- 
guage, it  is  called  a  chartered  bank."     "  Suppose  a  bank  was  enabled  to 
take  six  per  cent,  on  a  cash  credit,  instead  of  four."     "  The  Falkirk 
Union  Banking  Company  has  been  returned  to  this  house  as  sequestrated 
in  the  month  of  October,  1816."     "A  new  bank  was  constituted  as  a 
fund  upon  which  the  sum  of  £2,564,000  should  be  raised,  and  it  was 
called  the  Land  Bank  because  established  on  land  securities." 

5.  When  the  word  bank  is  preceded  by  the  indefinite  article,  a,  an,  — 
by  the  demonstrative  pronoun,  this,  that,  —  or  by  the  words  each,  any, 
every,  one,  it  belongs  to  the  singular ;  as,  "  Do  you  not  think  that  a  bank 
that  is  possessed  of  a  capital  of  one  million  may  and  will  do  more  busi- 
ness than  a  bank  that  is  only  possessed  of  half  a  million  ?  "     "  In  a  mo- 
ment of  pressure,  an  emergency  like  the  present,  that  bank  would  get 
into  great  disrepute  who  called  up  any  one  of  its  cash  credits."    "  What  is 
the  amount  of  the  small  note  circulation  in  that  bank  as  connected  with 
its  whole  circulation  ?  "     "  Each  bank  has  an  interest  to  issue  as  much 
of  the  small  note  circulation  as  it  can  ?  —  Certainly  it  has,  provided  the 
small  notes  can  be  kept  out;  but,  as  every  bank  makes  an  exchange  at 
Glasgow  twice  every  week,  and  the  exchanges  of  each  bank  come  back 
upon  itself,  and  the  balance  is  paid  by  a  draft  on  Edinburgh  at  sight," 

9 


A  Treatise  on  Banting. 

Ac.  "  I  believe  almost  every  bank  in  Scotland  has  an  agent  in  Glasgow.* 
M  Suppose  one  bank  in  Scotland  made  i/.t  notes  payable  in  Scotland,  at 
the  place  where  the  notes  were  issued."  u  Is  there  any  bunk  in  Cork 
now  that  issues  notes  ?  ** 

When  the  word  bank  is  introduced  in  either  the  singular  or  the 
plural  number,  the  same  number  should  be  preserved  throughout  the  sen- 
tence.  Hence,  the  following  sentence  of  Smollett's  is  inaccurate :  — 
"By  the  same  acts  the  bank  teas  required  to  advance  a  sum  n..t  ,\, •,,,(. 
ing  .£2,500,000  towards  discharging  the  national  debt,  if  wanted,  on  con- 
dition that  they  should  have  £  5  per  cent  for  as  much  as  they  might  ad- 
vance, redeemed  by  Parliament." 

7.  When  the  word  bank  is  used  in  the  singular  number,  it  is  consi<L 
ered  as  a  substantive  of  the  neuter  gender,  and  hence  is  associated  witn 
the  relative  pronoun  which;  but  when  used  in  the  plural  numlx-r  it  im- 
plies the  idea  of  persons,  and  has  accordingly  the  personal  relative  who  ; 
as,  "The  bank  with  which  he  kept  his  account  has  stopped  payment"; 
or,  "  The  bank  with  whom  he  kept  his  account  have  stopped  payment." 
"  The  bank  whose  interests  are  affected  by  the  measure  have  petitioned 
against  it."  "  The  bank  upon  whom  the  cheque  was  drawn  have  refused 
to  honor  it."  The  following  sentence  is  not  in  accordance  with  this  rule  : 
— >*In  a  moment  of  pressure,  an  emergency  like  the  present,  that  bank 
would  get  into  great  disrepute  who  called  up  any  of  its  cash  credits." 

I  have  not  observed  that  any  English  writer,  except  Mr.  McCulloch, 
tiered  a  bank  to  be  a  lady  ;  and  this  is  only  in  the  case  of  an  Irish 
Kink.  Under  the  article  "  Banking,"  in  his  Commercial  Dictionary,  IK; 
says,  — "  The  Bank  of  Ireland  draws  on  London  at  twenty  days'  date. 
She  neither  grants  cash  credits  nor  allows  any  interest  on  deposits  ;  she 
discounts  at  the  rate  of  £  5  per  cent."  This  mode  of  expression  is,  how- 
ever, very  common  with  American  writers.* 

II.  Should  we  write  accepter  or  acceptor  of  a  biH  of  exchange  ?  The 
name  of  the  agent  to  any  verb  is  usually  formed,  in  our  language,  by  the 
addition  of  r  or  er  to  the  verb ;  as,  indorser,  talker,  walker,  speaker. 
What  reason,  then,  can/  be  assigned  why,  in  the  present  case,  we  should 
depart  from  the  analogy  of  the  language  ?  We  do  not  say,  the  drawer, 
the  holdor,  the  payor  of  a  bill ;  why,  then,  should  we  say  the  acceptor  ? 
When  we  speak  of  the  accepter  of  a  bill,  why  should  we  not  spell  the 
word  in  the  same  way  as  when  we  speak  of  the  accepter  of  a  present,  or 
of  a  fee  ?  Yet  all  our  English  legal  authors  write  acceptor :  —  "A  person 
who  accepts  for  honor,  is  only  liable  if  the  original  drawee  do  not  pay ; 
and,  to  charge  such  acceptor,  there  must  be  a  presentment  for  payment 
to  such  original  drawee."  —  Bayley.  "  A  foreign  bill  is  binding  in  this 
country  on  the  acceptor,  though  he  accepted  by  parol,  or  by  writing  un- 
connected with  the  instrument"  —  Chilly.  "  Where  the  acceptor  of  a 
ftrged  bill  pays  it,  and  is  guilty  of  any  negligence  or  want  of  due  caution 
in  making  such  payment,  he  cannot  recover  the  money  so  paid,  from  the 
innocent  party  to  whom  he  paid  it"  —  Roscoe.  Scotch  authors,  however, 

*  It  hu  now  become  more  common  with  Enylitk  writers,  especially  with  reference 
to  the  Bank  of  England.  1849. 

10 


Banking  Terms. 

write  accepter.  "  An  English  inland  bill  has  generally  three  parties  to  it, 
the  drawer,  accepter,  and  payee  ;  whereas,  in  Scotland  most  of  the  inland 
bills  have,  at  first,  but  two  parties,  the  drawer  and  the  accepter ;  and  they 
are  made  payable  to  the  drawer  or  his  order."  (See  Glen,  On  the  Law 
of  Bills  of  Exchange  in  Scotland.) 

III.  Should  we  write  indorse  or  endorse  ?     Indorse  is  derived  direct 
from  the  Latin,  in  dorsum,  on  the  back.     Endorse  is  derived  from  the 
Latin,  through  the  French,  endosser.     In  such  cases,  most  writers  adopt 
the  Latin  mode  of  spelling,  in  preference  to  the  French,  as  indorse,  in- 
quire, intire ;  not  endorse,  enquire,  entire.     All  legal  authors  write  in- 
dorse.    "  A  promise  to  indorse,  though  on  sufficient  consideration,  cannot 
be  treated  as  an  actual  indorsement.'1''  —  Bayley.     "  The  liability  of  the 
indorser  is  discharged  by  want  of  notice,  as  in  the  case  of  the  drawer." 
—  Roscoe.     "  A  person  who  draws  or  indorses  a  bill,  or  indorses  a  note 
for  the  accommodation  of  the  acceptor,  or  maker,  or  payee,  or  prior  in- 
dorsers,  has,  on  paying  the  instrument,  a  remedy  over  thereon  against  the 
acceptor,  or  maker,  or  prior  party."  —  Chitty.     "  A  drawer  or  indorser 
cannot,  in  the  character  of  indorsee,  maintain  an  action  against  the  ac- 
cepter, where  the  indorsement  is  after  the  refusal  of  payment."  —  Glen. 

IV.  Should  we  say  indorsement  or  indorsation  1     In  England  we  al- 
ways use  the  word  indorsement.     "  No  particular  words  are  essential  to 
an  indorsement ;  the  mere  signature  of  the  indorser  is,  in  general,  suffi- 
cient." —  Bayley.     "  The  indorsement  may  be  upon  the  face,  or  at  the 
back  of  the  bill."  —  Chitty.     "  An  attesting  witness  to  an  indorsement  is 
necessary,  when  the  bill  is  for  a  less  sum  than  £  5."  —  Chitty.     In  Scot- 
land the  term  more  generally  used  is  indorsation.     "  If  a  bill  or  note  be 
granted  to  a  woman  while  single,  and  she  afterwards  marry,  the  right  to 
transfer  it  by  indorsation  would  vest  in  the  husband."     "  After  a  bill  has 
been  paid,  no  indorsation  can  take  place,  so  as  to  affect  the  accepter,  or 
any  of  the  parties  who  would  otherwise  be  discharged."  —  Glen.     The 
word  indorsement  is  also  used  in  Scotland,  though  more  rarely.     Both 
words  appear  to  have  precisely  the  same  meaning.     An  indorsation  is 
made,  either  by  the  indorser's  writing,  and  subscribing  an  order  to  pay 
the  contents  of  the  bill  to  some  particular  person  mentioned  by  name, 
which  is  styled  a.  full  indorsement,  or  by  merely  signing  his  name  on  the 
bill,  and  delivering  it  to  the  indorsee,  or  person  to  whom  it  is  indorsed, 
which  is  termed  a  Hank  indorsation"  —  Glen.     " A  fictitious  indorse- 
ment to  a  bill  is  forgery ;  such  indorsation  is  clearly  giving  it  a  false 
credit."  —  Glen. 

V.  Should  we  say  the  presentment  or  the  presentation  of  a  bill  of  ex- 
change ?     All  writers  agree  in  using  presentment.     "  If  upon  the  present- 
ment of  the  bill  for  acceptance  to  the  drawee,  he  refuse  or  neglect  to  ac- 
cept it,  the  drawer  is  immediately  responsible  to  the  holder,  although  the 
bill  has  not  become  due  according  to  its  tenor."  —  Chitty.     "  If  the  bill 
be  payable  after  sight,  and  the  drawee  detain  it  some  days  without  declar- 
ing his  intention  to  accept,  and  afterwards  incline  to  do  so,  the  acceptance 
must  be  from  the  date  of  the  first  presentment."  —  Glen.     "  Presentment 
for  payment  must  be  made  by  the  holder  of  the  bill,  or  by  an  agent  com- 
petent to  give  a  legal  receipt  for  the  money."  —  Glen.    "  Upon  a  present- 


A   Treatise  ON  Banking. 

ment  for  acceptance,  the  bill  should  !*>  left  with  the  drawee  twenty-four 
hours,  unless  in  the  interim  lie  cither  accept,  or  declare  a  it-solution  not  to 
accept.  Hut  a  bill  or  note  must  not  be  left  (unless  it  bo  paid)  on  a  pre- 
xfntmfnt  for  payment ;  if  it  be,  the  presentment  is  not  considered  as  nmtle 
until  the  money  is  called  for."  —  Bayley, 

VI.  Should  we  write  draught  or  draft  1     This  word  is  derived  from 
the  verb  to  draw,  and  probably  was  originally  written  and  pronounced 
draught.     Hut  custom,  which  is  the  law  of  language,  has  changed  both 
the  pronunciation  and  the  spelling  to  draft.     In  the  former  editions  of  this 
work,  1  mentioned  that  Mr.  Justice  Bayley  had  always  spelled  this  word 
draught ;  hut  in  a  recent  edition  of  his  work,  since  published,  I  find  that 
draught  has  been  changed  to  draft. 

VII.  Should  we  write  check  or  cheque  ?     This  word  is  derived  from  the 
French,  echecs,  chest.     The  chequers  placed  at  the  doors  of  public-houses 
are  intended  to  represent  chess-boards,  and  originally  denoted  that  the 
game  of  chess  was  played  in  those  houses.     Similar  tables  were  employed 
in  reckoning  money,  and  hence  came  the  expression,  to  check  on  account ; 
and  the  government  office,  where  the  public  accounts  were  kept,  was 
called  the  Exchequer.     It  probably  obtained  this  name  from  the  French 
fchiquier,  a  chess-board ;  though  Bluckstone  states  that  this  court  was 
called  the  exchequer,  from  the  chequered  cloth  which  covered  the  table. 
Of  the  two  forms  of  writing  this  word,  check  and  cheque,  the  latter  seems 
preferable,  as  it  is  free  from  ambiguity,  and  is  analogous  to  EX-CHEQUER, 
the  public  treasury.     It  is  also  used  by  the  Bank  of  England,  "  CHEQUE- 
OFFICE."     In  Bayley  both  forms  are  employed.      "  A  cheque  upon  a 
banker  was  lost,  and  paid  to  a  stranger  the  day  before  it  bore  date  ;  the 
banker  was  obliged  to  repay  the  money  to  the  loser."     u  By  the  usage  of 
trade,  a  banker  in  London  will  not  render  himself  responsible  by  retaining 
a  check  drawn  on  him,  provided  he  return  it  at  any  time  before  five  o'clock 
on  the  evening  of  the  day  in  which  it  was  drawn." 


SECTION  IV.  — THE  GENERAL  ADMINISTRATION  OF  A  BANK. 

To  be  a  good  banker  requires  some  intellectual  and  some  moral  qual- 
ifications. A  banker  need  not  be  a  man  of  talent,  but  he  should  be  a  man 
of  wisdom.  Talent,  m  the  sense  in  which  the  word  is  ordinarily  used,  im- 
plies a  strong  development  of  some  one  faculty  of  the  mind.  Wisdom 
implies  the  due  proportion  of  all  the  faculties.  A  banker  need  not  be  a 
poet  or  a  philosopher,  a  man  of  science  or  of  literature,  an  orator  or  a 
statesman.  He  need  not  possess  any  one  remarkable  quality  by  which  he 
»  distinguished  from  the  rest  of  mankind.  He  will  possibly  be  a  better 
banker  without  any  of  these  distinctions.  It  is  only  necessary  that  he 
should  possess  a  large  portion  of  that  practical  quality  which  is  called  com- 
mon sense.  Banking  talent  (using  the  word  talent  here  in  the  sense  of 
adaptation  of  character  to  any  particular  pursuit)  consists  more  in  the 
union  of  a  number  of  qualities,  not  in  themselves  individually  of  a  striking 

12 


Administration  of  a  Bank. 

character,  but  rare  only  in  their  combination  in  the  same  person.  It  is  a 
mistake  to  suppose  that  banking  is  such  a  routine  employment  that  it  re- 
quires neither  knowledge  nor  skill.  The  number  of  banks  that  have  failed 
within  the  last  fifty  years  are  sufficient  to  show  that  to  be  a  good  banker 
requires  qualities  as  rare  and  as  important  as  those  which  are  necessary 
to  attain  eminence  in  any  other  pursuit.  The  dealer  in  money  exercises 
intellectual  faculties  of  a  high  order,  and  of  great  value  to  the  community. 
His  profession  has  a  powerful  bearing  on  the  practical  happiness  of  man- 
kind. 

"  The  philosophy  which  affects  to  teach  us  a  contempt  of  money,  does  not  run  very 
deep ;  for,  indeed,  it  ought  to  be  still  more  clear  to  the  philosopher  than  it  is  to  the  or- 
dinary man,  that  there  are  few  things  in  the  world  of  greater  importance.  And  so 
manifold  are  the  bearings  of  money  upon  the  lives  and  characters  of  mankind,  that  an 
insight  which  should  search  out  the  life  of  a  man  in  his  pecuniary  relations,  would  pen- 
etrate into  almost  every  cranny  of  his  nature.  He  who  knows,  like  St.  Paul,  both  how 
to  spare  and  how  to  abound,  has  a  great  knowledge :  for  if  we  take  account  of  all  the 
virtues  with  which  money  is  mixed  up,  —  honesty,  justice,  generosity,  charity,  frugal- 
ity, forethought,  self-sacrifice,  —  and  of  their  correlative  vices,  it  is  a  knowledge  which 
goes  near  to  cover  the  length  and  breadth  of  humanity :  and  a  right  measure  and  man- 
ner in  getting,  saving,  spending,  giving,  taking,  lending,  borrowing,  and  bequeathing, 
would  almost  argue  a  perfect  man."  (Taylor's  Notes  on  Life.) 

But  though  wisdom,  —  or,  in  other  words,  a  high  degree  of  common 
sense,  —  does  not  imply  the  possession  of  any  remarkable  talent  (the  un- 
due development  of  any  one  faculty),  it  always  implies  the  absence  of 
any  remarkable  defect.  One  great  defect  in  a  banker  is  a  want  of  de- 
cision. A  banker  ought  to  know  how  to  balance  the  evidence  on  each 
side  of  a  question,  and  to  arrive  speedily  at  a  just  conclusion. 

"  Indecisiveness  will  be,  ceteris  paribus,  most  pernicious  in  affairs  which  require  se- 
crecy. 1st.  Because  the  greatest  aid  to  secrecy  is  celerity.  2d.  Because  the  unde- 
cided man,  seeking  after  various  counsel,  necessarily  multiplies  confidences.  The  pre- 
text for  indecisiveness  is  commonly  mature  deliberation ;  but,  in  reality,  indecisive  men 
occupy  themselves  less  in  deliberation  than  others;  for,  to  him  who  fears  to  decide, de- 
liberation (which  has  a  foretaste  of  that  fear)  soon  becomes  intolerably  irksome,  and 
the  mind  escapes  from  the  anxiety  of  it  into  alien  themes.  Or,  if  that  seems  too  open 
a  dereliction  of  its  task,  it  gives  itself  to  inventing  reasons  of  postponement.  And  the 
man  who  has  confirmed  habits  of  indecisiveness,  will  come  in  time  to  look  upon  post- 
ponement as  the  first  object  in  all  cases,  and  wherever  it  seems  to  be  practicable,  will 
bend  all  his  faculties  to  accomplish  it."  * 

Another  defect  is  a  want  of  firmness.  A  banker  having,  after  a  mature 
consideration,  made  up  his  mind,  should  be  capable  of  a  strict  adherence 
to  his  previous  determination ;  he  should  know  when  to  say,  No ;  and 
having  once  said  No,  he  should  adhere  to  it. 

Another  defect  is  a  hasty  or  impetuous  temper. 

"  He  that  answereth  a  matter  before  he  heareth  it,  it  is  folly  and  shame  unto  liim." 
"  He  that  is  slow  to  wrath  is  of  great  understanding,  but  he  that  is  hasty  of  spirit  ex- 
alteth  folly."  "  A  wise  man  will  hear,  and  will  increase  learning ;  and  a  man  of  un- 
derstanding shall  attain  unto  wise  counsels."  (Proverbs  of  Solomon.) 

Another  defect  is  that  of  being  swayed  by  any  personal  or  constitutional 
prepossession.  Almost  every  man,  —  not  excepting  even  the  banker,  — 

*  Taylor's  Statesman.    I  would  advise  all  bankers,  and  all  other  persons  at  the  head 
of  large  establishments,  to  read  this  little  work. 
B  13 


A   Trratite  on  Banking. 

has  a  sin  by  which  he  is  most  easily  beset ;  a  constitutional  defect,  against 
« inch  it  is  necessary  be  should  be  upon  his  guard. 

It  is  a  great  advantage  to  a  banker,  and  indeed  to  every  one  else,  to 
kiinw  himself.  He  should  know  wherein  he  excels,  and  wherein  he  is  de- 
ficient He  ought  to  know  whether  he  is  disposed  from  his  temperament 
to  be  excessively  cautious  or  excessively  liberal  ;  whether  his  manners  are 
courteous  or  abrupt ;  whether  he  is  apt  to  view  matters  on  their  gloomy 
or  oo  their  bright  side  ;  whether  social  intercourse  renders  him  more  or 
leas  fit  for  his  official  engagements ;  whether  the  presents  and  civilities  he 
ves  from  his  customers  do,  or  do  not,  affect  his  transactions  with 
them  in  matters  of  business,  \\h-n  he  has  made  a  loss,  he  should  ex- 
amine whether  the  loss  was  occasioned  by  the  ordinary  operation  of  events, 
or  produced  by  any  little  weaknesses  of  his  own  character.  He  should 
record  all  those  instances  in  which  he  has  shown  a  want  of  firmness,  of 
discretion,  of  discrimination,  or  of  perseverance  ;  and  should  guard  in  fu- 
ture against  the  exhibition  of  any  similar  defect :  — 

"Man,  know  thyself;  all  wisdom  centres  there." 

But  while  a  banker  should  make  himself  acquainted  with  his  own  de- 
fects, he  ought  not  to  let  his  customers  become  acquainted  with  them. 
All  wise  men  know  their  own  defects ;  none  but  fools  publish  them. 
Crafty  men,  who  often  have  occasion  to  borrow  money,  are  quick  in  per- 
ceiving the  weaknesses  of  their  banker.  And  if  they  find  that  by  coaxing, 
or  flattering,  or  gossiping,  or  bribing,  or  threatening,  they  can  influence 
his  conduct,  he  will  always  be  at  their  mercy.  On  this  account  it  is,  per- 
haps, advisable  that  a  banker  should  not  have  too  much  social  intercourse 
with  those  of  his  customers  who  have  occasion  to  ask  him  for  any  large 
amount  of  accommodation. 

Wisdom  implies  prudence  and  discretion,  and  these  should  regulate  the 
whole  conduct  of  a  banker,  not  merely  when  engaged  in  banking  transac- 
tions, but  at  all  other  times.  We  may  apply  to  a  banker  the  language  we 
have  elsewhere  applied  to  a  merchant :  — 

*  The  amusement*  of  a  merchant  should  correspond  with  his  character.  He  should 
ngagc  in  those  recreations  which  partake  of  the  nature  of  gambling,  and  hut 
in  those  at  a  frivolous  description.  A  judj.'c  is  not  always  on  die  bench,  a 


clergyman  is  not  always  in  the  jiulj.it,  nor  is  a  men  hunt  always  on  'change  :  but  <-a<-h 
if  expected  at  all  times  to  abstain  from  any  amusements  which  are  not  consistent  with 
his  professional  character.  The  credit  of  a  merchant  depends  not  merely  on  his  wealth, 
bat  also  upon  the  opinion  generally  entertained  of  his  personal  qualities;  and  he 
should  cultivate  a  reputation  for  prudence  and  propriety  of  conduct,  as  part  of  his  M<»-k. 
in  trade."  (Lecture*  on  the  Ilulory  and  PrindpUt  of  Ancient  Commerce,  by  J.  W. 
Gilbart). 

A  banker  should  have  a  talent  for  selecting  suitable  instruments.  lie 
ought  not  only  to  know  himself;  he  ought  also  to  have  a  capacity  for 
knowing  others.  He  should  know  how  to  choose  proper  clerks  for  the 
discharge  of  the  duties  of  the  office.  He  should  know  also  what  parties 
to  employ  to  procure  him  confidential  information  as  to  the  character  and 
circumstances  of  commercial  houses,  or  of  individuals.  He  should  know 
bow  to  choose  his  partners  or  coadjutors,  and  should  endeavour  to  select 
those  who  possess  qualifications  in  which  he  is  himself  deficient.  In  all 

14 


Administration  of  a  Bank. 

cases  when  he  has  any  object  to  effect,  he  should  know  how  to  make  use 
of  other  men.  We  may  here,  as  in  some  other  cases,  apply  to  a  banker 
the  observations  Mr.  Taylor  applies  to  a  statesman  :  — 

"  The  most  important  qualification  of  one  who  is  high  in  the  service  of  the  State  is  his 
fitness  for  acting  through  others,  since  the  operations  vicariously  effected  ought,  if  he 
knows  how  to  make  use  of  his  power,  to  predominate  greatly  over  the  importance 
which  can  attach  to  any  man's  direct  and  individual  activity.  The  discovery  and  use 
of  instruments  implies  indeed  activity,  as  well  as  judgment;  because  it  implies  that 
judgment  which  only  activity  in  affairs  can  give.  But  it  is  a  snare  into  which  active 
statesmen  are  apt  to  fall,  to  lose,  in  the  importance  which  they  attach  to  the  immediate 
and  direct  effects  of  their  activity,  the  sense  of  that  much  greater  importance  which 
they  might  impart  to  it  if  they  applied  themselves  to  make  their  powers  operate 
through  the  most  effective  and  the  widest  instrumentality.  The  vanity  of  a  statesman 
is  more  flattered  in  the  contemplation  of  what  he  does  than  of  what  he  causes  to  be 
done  ;  although  any  man  whose  civil  station  is  high  ought  to  know  that  his  causative 
might  be  beyond  all  calculation  wider  than  his  active  sphere,  and  more  important." 
(Taylor's  Statesman.) 

A  neglect  of  this  rule  has  occurred  in  the  history  of  some  joint-stock 
banks,  where  the  manager  has  impaired  his  own  health,  and  damaged  his 
bank,  by  taking  upon  himself  a  vast  variety  of  duties  which  should  have , 
been  assigned  to  others ;  forgetful  that  in  large  establishments  the  chief 
officer  should  confine  his  personal  attention  to  those  duties  which  are  in- 
tellectual, or  which  are  of  the  chief  importance  ;  while  the  duties  which 
are  of  a  mere  manual,  or  less  important  character,  should  be  performed 
through  the  instrumentality  of  assistants.  We  shall  illustrate  the  principle 
of  working  through  others  by  a  Scriptural  example  :  — 

"  And  it  came  to  pass  that  Moses  sat  to  judge  the  people ;  and  the  people  stood  by 
Moses  from  the  morning  unto  the  evening.  And  Moses'  father-in-law  said  unto  him, 
The  thing  that  thou  doest  is  not  good.  Thou  wilt  surely  wear  away,  both  thou  and 
this  people  that  is  with  thee  :  for  this  thing  is  too  heavy  for  thee ;  thou  art  not  able  to 
perform  it  thyself  alone.  Hearken  now  unto  my  voice,  and  I  will  give  thee  counsel. 
Thou  shall  provide  out  of  all  the  people  able  men ;  and  place  such  over  them,  to  be 
rulers  of  thousands,  and  rulers  of  hundreds,  rulers  of  fifties,  and  rulers  of  tens.  And 
let  them  judge  the  people  at  all  seasons :  and  it  shall  .be  that  every  great  matter  they 
shall  bring  unto  thee,  but  every  small  matter  they  shall  judge ;  so  shall  it  be  easier  for 
thyself,  and  they  shall  bear  the,  burden  with  thee.  So  Moses  hearkened  to  the  voice 
of  his  father-in-law,  and  did  all  that  he  had  saia."  (Exodus  xviii.  13  -  22.) 

l;  And  Moses  said,  I  am  not  eloquent,  but  I  am  slow  of  speech  and  of  a  slow 
tongue."  —  "  Is  not  Aaron  the  Levite  thy  brother  ?  I  know  that  he  can  speak  well. 
Thou  shall  speak  unto  him,  and  put  words  into  his  mouth;  and  he  shall  be  thy 
spokesman  unto  the  people."  (Exodus  iv.  10-16.) 

A  banker  should  know  how  to  economize  his  own  time.  One  mode  ol 
doing  this  will  be,  as  we  have  intimated,  to  assign  inferior  duties  to 
others.  His  accountant  should  keep  his  books  and  make  his  calculations 
His  secretary  should  write  his  letters  (except  those  of  a  private  or  confi- 
dential nature),  and  he  should  only  sign  them.  His  chief  clerk  should 
attend  to  the  discipline  of  the  office.  A  banker  at  the  head  of  a  large 
establishment  should  not  only  be  acquainted  with  the  art  of  banking ;  he 
ought  also  to  be  acquainted  with  the  art  of  government.  He  ought  to  put 
a  clever  man  at  the  head  of  each  department,  and  reserve  to  himself  only 
the  duty  of  general  superintendence.  He  should  give  these  parties  a 
pretty  wide  discretion,  and  not  encourage  them  to  ask  his  instructions 
about  matters  of  comparatively  trifling  importance.  If  he  does  this,  they 

15 


A  Treatise  on  Banking. 

will  never  learn  to  think  fur  themselves,  —  never  feel  that  wholesome 
anxiety  which  result*  from  a  sense  of  responsibility,  —  and  never  acquire 
that  decision  of  mind  which  arises  from  the  necessity  of  forming  :m  inde- 
pendent judgment.  Consequently,  they  will  be  less  useful  to  him  in  their 
present  position,  nnd  never  become  qualified  fur  higher  offices. 

Another  mode  of  economizing  time  is  to  observe  a  principle  of  onlrr. 
A  banker  should  come  to  the  bank  every  day  at  the  same  hour;  attend 
to  his  affairs,  one  by  one,  in  the  same  order;  and  leave  the  li.-mk  at  his 
usual  time.  By  observing  this  routine,  he  will  not  only  save  much  time, 
but  he  will  avoid  tumultuous  feelings,  and  maintain  a  calmness  of  mind 
and  of  in-inner,  that  will  be  useful  in  all  his  affairs.  He  will  also  acquire 
from  habit,  a  coolness  of  investigation  and  a  promptness  of  decision,  and 
^  11  get  through  a  great  deal  of  work  without  ever  appearing  to  be  in 
a  hurry. 

Another  mode  of  economizing  time  is,  to  make  his  interviews  with  his 
customers,  or  with  other  parties,  as  short  as  he  con.  He  should  not  en- 
courage conversation  upon  any  other  topic  than  that  which  is  the  occasion 
of  the  interview.  He  had  better  receive  his  customers  standing ;  as  in 
that  case  they  will  stand  too,  and  are  not  likely  to  remain  so  long  as  if 
they  were  to  sit  down.  And  the  furniture  of  the  room  should  be  so  ar- 
ranged that  the  customer,  if  he  sit  down,  should  sit  near  the  door,  so  that 
he  may  depart  whenever  disposed.  He  is  not  likely  to  remain  so  long  as 
if  seated  comfortably  by  the  fireside.  It  is  also  desirable  that  his  room 
should  be  so  placed,  with  reference  to  the  other  parts  of  the  building,  that 
while  it  has  one  door  open  to  the  public,  it  should  have  another  door 
opening  into  the  office  ;  so  that  he  may  easily  pass  into  the  office,  to  as- 
certain  the  state  of  a  customer's  account,  or  to  consult  with  himself  or  an- 
other person,  in  doubtful  cases,  as  to  the  course  to  be  adopted.  It  is  not 
advisable  that  the  customer  who  applies,  for  instance,  to  have  a  heavy  bill 
discounted,  should  witness  the  hesitation  or  the  deliberation  of  the  banker. 
Hence  it  is  better,  when  it  can  be  done,  to  establish  the  practice  of  the 
customer  giving  the  bills  to  a  clerk,  who  shall  bring  them  into  the  bank- 
er's room,  and  take  back  his  reply. 

A  banker  will  take  means  for  obtaining  and  recording  information.  He 
should  not,  as  we  have  said,  keep  any  books  himself;  but  he  ought  al- 
ways to  have  in  his  room,  ready  for  immediate  reference,  if  necessary, 
the  M  General  Balance  Book,"  containing  the  weekly  balances  of  the  gen- 
eral ledger,  which  will  show  the  weekly  progress  of  his  business  for  sev- 
eral years  past ;  the  "  Daily  Balance  Book,"  showing  the  daily  balance  to 
the  credit  of  each  of  his  customers  in  the  current-account  ledger ;  the 
"  Weekly  Discount  Balance  Book,"  showing  the  amount  of  discounts,  loans, 
or  other  advances  which  each  customer  has  every  Saturday  night ;  the 
**  Inspection  Book,"  showing  the  amount  of  bills  bearing  the  names  of 
houses  who 'do  not  keep  an  account  with  him  ;  the  "  Information  Book," 
containing  the  character  of  all  the  houses  about  whom  he  has  had  occa- 
sion to  make  inquiries ;  and,  finally,  a  "  Private  Memorandum  Book,"  in 
which  is  entered  any  special  agreements  that  he  has  made  with  his  cus- 
tomers. It  is  also  useful  to  a  banker  to  have  a  list  of  his  c  clas- 
sified according  to  their  trades  or  professions  ;  such  as  corn  merchants, 

16 


Administration  of  a  Bank. 

ieatner  factors,  grocers,  solicitors,  &c.,  dec.  The  banker  would  thus  see 
at  a  glance  among  what  classes  of  society  his  connections  are.  When 
any  public  event  was  likely  to  affect  any  class,  —  such,  for  instance,  as 
the  corn  merchants,  —  he  would  see  how  many  of  his  customers  are  likely 
to  be  affected.  By  thus,  too,  bearing  in  mind  the  trade  or  profession  of 
his  customers,  he  would  be  able  to  judge  more  readily  whether  the  bills 
they  brought  him  for  discount  had  arisen  out  of  their  business  trans- 
actions. 

Of  these  books,  one  of  the  most  important  is  the  "  Information  Book." 
There  is  no  doubt  that  a  banker  of  great  experience,  and  of  a  strong 
memory,  may  always  bear  in  his  mind  a  very  correct  estimate  of  the 
standing  and  character  of  all  the  houses  that  usually  come  under  his 
notice.  But  this  does  not  supersede  the  necessity  for  recording  his  in- 
formation in  a  book.  His  memory  may  fail,  and  that  too  on  important 
occasions  ;  and  certainly  if  he  leave  the  bank  for  a  short  time,  as  he  must 
sometimes  have  occasion  to  do,  he  will  carry  his  memory  with  him.  But 
if  the  Information  Book  be  closely  kept  up,  he  will  record  his  knowledge 
for  the  use  of  those  who  will  have  to  take  his  place.  It  is  no  valid  objec- 
tion to  the  keeping  of  such  a  book,  to  say  that  the  position  of  houses  is 
perpetually  changing.  Those  changes  should  be  recorded,  so  that  their 
actual  standing  should  always  be  readily  referred  to.  If  a  banker  is  re- 
quested by  a  customer  to  make  inquiry  about  a  house,  he  should  record 
the  information  he  gets  for  his  own  guidance,  in  case  any  bills  on  that 
house  should  afterwards  be  offered  him  for  discount. 

A  banker  will  get  information  about  parties  from  inquiry  at  their 
banker's,  as  we  have  mentioned  at  page  6.  This  information  may  be 
defective  in  two  ways.  In  the  first  place,  their  banker  may  judge  of 
them  from  the  account  they  keep,  —  that  is,  from  the  balance  to  their 
credit,  —  and  thus  he  may  give  too  good  an  account  of  them ;  or,  sec- 
ondly, their  banker  may  have  an  interest  in  keeping  up  their  credit,  and 
under  this  bias  he  may  not  give  them  so  bad  a  character  as  they  actually 
deserve.  Another  source  of  information  is  from  parties  in  the  same  trade. 
Houses  in  the  same  trade  know  pretty  well  the  standing  of  one  another. 
Wholesale  houses  are  well  acquainted  with  the  retail  shopkeepers  who 
buy  of  them.  Most  bankers  have  among  their  own  customers  some 
houses  in  almost  every  trade,  who  can  give  them  any  information  re- 
specting other  houses  which  they  may  require.  The  bills  that  pass  through 
his  hands  will  also  often  give  him  some  useful  hints  respecting  the  parties 
whose  names  are  upon  them. 

It  is  of  great  importance  to  a  banker  to  have  an  ample  knowledge  of 
the  means  and  transactions  of  his  customers.  The  customer,  when  he 
opens  his  account,  will  give  him  some  information  on  this  subject.  The 
banker  will  afterwards  get  information  from  his  own  books.  The  amount 
of  transactions  that  his  customer  passes  through  his  current  account  will 
show  the  extent  of  his  business.  The  amount  of  his  daily  balance  will 
show  if  he  has  much  ready  cash.  The  extent  and  character  of  the  bills 
he  offers  for  discount,  will  show  if  he  trust  large  amounts  to  individual 
houses,  and  if  these  are  respectable.  On  the  other  hand,  the  bills  hia 
customer  may  accept  to  other  parties,  and  his  payments,  will  show  the 
B*  17 


A  Treatist  on  Banking. 

obM  of  people  with  whom  ho  deals,  or  who  arc  in  the  habit  of  giving  him 
credit  But  one  main  source  of  infonimtion  is  to  see  the  man.  This, 
like  other  means  of  information,  will  sometimes  fail ;  but,  generally  8|>< 'A- 
ing,  the  appearance  and  manners  of  a  man  will  show  his  diameter.  Some 
people  always  send  their  clerk  to  the  banker  with  hills  for  discount,  &c. 
This  is  all  very  well,  if  they  want  no  extraordinary  accommodation  ;  but  if 
they  ask  for  any  thing  out  of  the  usual  way,  the  banker  had  better  say  that 
he  wishes  to  see  the  principal.  And  if  he  had  a  doubt  whether  his  cus- 
tomer was  tricky  or  honest,  speculative  or  prudent,  let  him  be  guided  by 
his  first  impression,  —  we  mean  the  impression  produced  by  the  first  in- 
terview. In  nine  cases  out  of  ten  the  first  impression  will  be  found  to  be 
correct.  It  is  not  necessary  to  study  physiognomy  or  phrenology  to  be 
able  to  judge  of  the  character  of  men  with  whom  we  converse  upon  mat- 
ters of  business. 

A  country  banker  has  greater  facilities  than  a  London  banker  of  ascer- 
taining the  character  and  circumstances  of  other  parties.  In  a  country 
town  every  thing  is  known  about  every  body,  —  a  man's  parentage  and 
connections,  his  family  and  associates,  the  property  he  has  already  received, 
and  what  he  may  expect  to  receive  from  his  relations,  and,  above  all,  his 
personal  habits  and  disposition.  Upon  the  lost  point  we  will  make  a  short 
extract  from  an  excellent  series  of  "  Letters  to  a  Branch  Manager,"  now 
in  course  of  publication  in  the  "  Bankers1  Magazine,"  under  the  signature 
of  "  Thomas  Bullion." 

"  Next  in  importance  to  a  study  of  his  accounts,  the  habits  and  character  of  a  client 
are  deserving  of  your  attentive  consideration.  If  a  man's  style  of  living,  for  exam  [>!<•, 
becomes  extravagant,  and  he  gives  himself  orcr  to  excess,  you  cannot  too  promptly 
apply  the  curb,  however  regular  the  transactions  upon  his  account  may  seem  ;  because 
Tears  may  elapse  before  mere  irregularity  of  living  will  make  any  impression  on  his 
banking  account ;  whereas  irregularity  in  business  will  exhibit  itself  immediately,  and 
for  this  reason, — that  whereas  improvident  habits  of  living  involve  a  continuous  waste 
in  small  sums,  spreading  over  tolerably  long  periods,  improvidence  in  business  may 
involve  in  one  fell  swoop  the  loss,  perhaps,  of  thousands.  I  hold,  then,  that  you  are 
not  warranted  in  all  cases  in  feeling  satisfied  of  a  man's  perfect  responsibility  until  his 
banking  account  exhibits  indubitable  evidence  to  the  contrary." — Bankeri  Magazine^ 
December,  1848. 

A  banker  should  always  have  general  principles ;  that  is,  he  should 
have  fixed  rules  for  the  government  of  his  bank.  He  should  know  before- 
hand whether  he  will  or  will  not  advance  money  on  mortgage,  or  upon 
deeds,  or  upon  bills  of  lading,  or  warrants  ;  or  whether  he  will  discount 
bills  based  upon  uncommercial  transactions,  or  having  more  than  three 
months  to  run.  These  are  only  a  few  of  the  cases  in  which  a  banker  will 
find  it  useful  to  store  his  mind  with  general  principles. 

One  advantage  of  this  adoption  of  general  principles  is,  that  it  saves 
time.  If  a  banker  can  say,  in  reply  to  a  customer,  u  It  is  contrary  to  the 
rules  of  our  bank  to  advance  money  upon  bills  of  lading,"  the  reply  is 
conclusive.  But  if  he  hod  not  previously  adopted  any  rule  upon  the  sul>- 
ject,  the  reply  would  have  taken  up  much  more  time.  Another  advantage 
is,  that  it  gives  decision  of  mind,  and  saves  the  banker  from  being  "  talked 
over "  by  any  of  his  customers  who  may  possess  fluency  of  speech,  or 
dexterity  in  debate.  In  this  case,  the  banker  whose  mind  is  stored  with 

18 


Administration  of  a  Bank. 

general  principles,  though  he  may  listen  patiently  to  all  his  customer  shall 
advance,  will  give  the  same  reply  which  he  would  have  given,  had  the  ap- 
plication been  made  in  fewer  words. 

But  although  a  banker  ought  to  have  a  large  stock  of  general  princi- 
ples, —  and  this  stock  will  increase  as  his  experience  increases,  —  yet  it 
may  not  be  always  wise  to  explain  these  principles  to  his  customer.  It  is 
generally  best,  when  a  banker  gives  a  refusal,  to  give  no  reasons  for  that 
refusal.  Banking  science  is  so  little  understood  that  the  public  generally 
are  unable  to  appreciate  its  principles.  Besides,  a  man  who  wants  to 
borrow  money  can  never  be  convinced  by  reasoning  that  his  banker  is 
right  in  refusing  to  lend  it  to  him  ;  nor,  in  fact,  did  the  banker  himself  ac- 
quire his  knowledge  of  banking  by  reasoning.  He  acquired  it,  not  by 
reasoning,  but  by  experience ;  and  he  must  not  expect  that  his  customers, 
who  have  had  no  experience,  will,  by  reasoning  alone,  readily  acquiesce 
in  the  banking  principles  he  may  propound  to  them.  In  most  cases, 
therefore,  he  had  better  keep  his  reasons  to  himself. 

But  while  we  contend  that  every  banker  should  have  general  principles, 
we  do  not  say  that  in  no  possible  case  should  he  depart  from  them.  But 
he  should  not  look  for  such  cases  ;  they  are  rare,  and  when  they  do  occur 
they  will  force  themselves  upon  his  attention.  If  under  shelter  of  the 
truism,  "  all  rules  have  their  exceptions,"  he  departs  from  his  general 
principles  whenever  he  finds  it  convenient  or  profitable  to  do  so,  he  may 
as  well  have  no  general  principles  at  all. 

It  seems  desirable  that  a  banker  in  a  large  city  should  mark  out  for 
himself  one  or  two  main  branches  of  business,  rather  than  attempt  to 
carry  on  banking  in  all  its  branches.  We  see  this  line  of  conduct  adopted 
by  some  of  the  most  eminent  London  bankers.  A  west  end  banker  will 
not  discount  a  bill ;  a  city  banker  will  not  lend  money  on  mortgage. 
Different  kinds  of  banking  exist  in  different  parts  of  the  country,  accord- 
ing to  the  character  and  circumstances  of  the  district.  And  in  London 
there  are  numerous  classes  of  people,  and  it  may  be  both  proper  and  ad- 
vantageous for  a  banker  to  adapt  his  mode  of  business  chiefly  to  the  re- 
quirements of  some  one  particular  class.  Different  banks  may  thus  pur- 
sue different  courses,  and  all  be  equally  successful. 

A  banker  will  exercise  due  caution  in  taking  new  accounts.  He  will 
expect  the  new  customer  to  be  introduced  by  some  person  to  whom  he  is 
personally  known.  The  more  respectable  the  introducer,  the  higher 
opinion  will  the  banker  entertain  of  the  party  introduced.  If  a  party  ap- 
ply to  open  an  account  without  such  an  introduction,  he  is  asked  to  give 
references  to  some  well-known  houses.  He  is  expected  to  state  to  the 
banker  the  kind  of  business  in  which  he  is  engaged,  and  the  extent  of  ac- 
commodation, if  any,  that  he  is  likely  to  require.  He  will  state  the  kind 
and  character  of  the  bills  he  will  have  to  offer  to  discount,  and  mention 
any  peculiarity  in  his  business  or  circumstances  that  may  occasionally  re- 
quire especial  consideration.  It  is  a  great  folly  in  a  party  opening  an  ac- 
count to  make  any  representation  that  will  not  afterwards  turn  out  to  be 
correct.  Every  banker  is  anxious  to  avoid  taking  shabby  accounts  ;  and 
especially  such  as  are  opened  for  the  purposes  of  fraud,  or  to  obtain  a  fic- 
titious credit,  or  to  get  undue  accommodation.  It  is  considered  to  be  not 

19 


A  Trtatite  on  Banking. 

•dvisable  to  take  the  nccount  of  a  party  who  has  another  hanker,  especi- 
ally  if  he  open  the  account  for  the  purpose  of  getting  additional  discount. 
Tiie  object  of  a  party  keeping  two  bunkers  is,  usually,  to  get  ns  much  ac- 
commodation as  he  can  from  each.  If  an  account  is  brought  from  another 
hunk,  the  reason  of  the  removal  should  be  distinctly  stated,  and  tin-  hanker 
will  accept  or  reject  it,  according  to  circumstances.  It  is  IMU!  policy  in  a 
Banker  to  attempt  to  draw  away  the  connections  of  another  bank,  by 
offering  them  greater  accommodation.  It  is  also  usually  bad  policy  to 
take  the  accounts  of  parties  residing  at  a  distance,  as  their  transactions  do 
not  come  under  the  notice  of  the  banker  ;  and  the  fact  of  their  pa>.siiig  by 
the  banks  in  their  neighbourhood  to  go  elsewhere,  is  one  that  should  ex- 
eftb  suspicion.  It  is  not  advisable  for  London  bankers  to  take  the  ac- 
counts of  private  individuals  who  reside  in  the  country.  They  should  be 
referred  to  the  bankers  in  their  own  districts. 

1  A  small  banker  should  not  attempt  to  take  large  accounts.  Banks, 
otherwise  well  administered,  have  been  ruined  by  one  large  account.  If 
this  account  requires  accommodation,  it  will  absorb  the  banker's  funds,  so 
that  he  will  be  compelled  to  stint  his  other  customers,  or  to  have  recourse 
to  re-discount,  or  other  modes  of  raising  money.  Even  if  it  be  only  a 
deposit  account,  it  may  produce  inconveniences.  A  small  banker  cannot 
so  readily  employ  this  large  deposit  profitably,  and  yet  have  it  at  com- 
mand whenever  required ;  and  the  additional  amount  ho  must  keep  in  his 
till  will  be  proportionably  greater  than  would  bo  kept  by  a  large  banker. 
Thus,  if  £  100,000  be  placed  in  a  bank  that  lias  already  .£2,000,000  of 
deposits,  the  additional  sum  kept  in  the  till  to  meet  daily  demands  may 
not  be  much  increased;  but  should  it  be  lodged  with  a  banker  \\liose  de- 
posits are  only  £  300,000,  the  increase  of  notes  to  be  kept  in  his  till  will 
be  very  considerable.  This  shows  that  large  deposits  are  not  so  profitable 
to  small  banks  as  to  large  ones.  There  is  also  a  danger  that  a  small 
banker  will  employ  his  large  deposits  in  such  a  way  as  shall  render  him 
less  ready  to  repay  them  punctually.  Instances  have  occurred  of  small 
banks  being  greatly  inconvenienced  by  the  repayment  of  large  deposits, 
which  had  been  placed  in  their  hands  by  railway  companies.  It  is  pru- 
dent, therefore,  in  a  banker  to  apportion  the  amount  of  his  transactions  to 
the  extent  of  his  business. 

A  very  important  part  of  the  business  of  a  banker  consists  in  the  dis- 
counting of  bills.  The  bills  presented  to  a  bank  for  discount,  may  gener- 
ally be  divided  into  the  following  classes  :  — 

"  1st.  Bills    drawn    by  producers  or  manufacturers   upon  wholesale 
dealers. 

**2dly.  Bills  drawn  by  wholesale  dealers  upon  retail  dealers. 

"  3dly.  Bills  drawn  by  retail  dealers  upon  consumers. 

"  4thly.  Bills  not  arising  out  of  trade,  but  yet  drawn  against  value,  as 
rent,  dec. 

"  5thly.  Kites,  or  accommodation  bills. 

"  The  first  two  classes  of  bills  are  the  best,  and  are  fair  legitimate  bills 
for  bankers  to  discount. 

u  The  third  class  ought  not  to  be  too  much  encouraged  ;  they  are  for 
comparatively  small  amounts,  and  are  drawn  by  shopkeepers  and  trades- 

20 


Administration  of  a  Bank. 

men  upon  their  customers.  To  discount  these  bills  freely  would  encour- 
age extravagance  in  the  accepters,  and  ultimately  prove  injurious  to  the 
drawers.  When  a  man  accepts  bills  to  his  butcher,  baker,  tailor,  uphol- 
sterer, &c.,  he  may  fairly  be  suspected  of  living  beyond  his  income. 
Solvent  and  regular  people  pay  their  tradesmen's  accounts  with  ready 
money. 

"  The  fourth  class  of  bills,  though  sometimes  proper,  ought  not  to  be 
too  much  encouraged.  Persons  out  of  trade  have  no  business  with  bills. 

"  The  last  class  of  bills  should  always  be  rejected.  To  an  experienced 
banker,  who  knows  the  parties,  the  discovery  of  accommodation  bills  is 
by  no  means  difficult.  They  are  usually  drawn  for  even  amounts,  for 
the  largest  sum  that  the  stamp  will  bear,  and  for  the  longest  term  that  the 
bank  will  discount,  and  aref  presented  for  discount  soon  after  they  are 
drawn.  The  parties  are  often  relations,  friends,  or  parties  who,  from 
their  avocations,  can  have  no  dealings  with  each  other. 

"  Not  only  the  parties  and  the  amounts  of  bills  are  matters  of  consider- 
ation to  a  banker,  but  also  the  time  they  have  to  run  before  they  fall  due. 
A  bill  drawn  for  a  long  term  after  date,  is  usually  styled,  not  perhaps  very 
properly,  '  a  long  dated  bill.'  A  bill  drawn  at  a  short  term,  is  styled,  '  a 
short  dated  bill.'"  (History  and  Principles  of  Banking,  p.  167.) 

In  doubtful  cases,  the  banker,  before  discounting  a  bill,  will  probably 
look  through  his  books,  and  satisfy  himself  with  regard  to  the  following 
inquiries :  — 

What  is  the  character  of  the  customer  ?  This  inquiry  will  be  answered 
from  the  Information  Book.  What  is  the  usual  balance  of  his  cash  ac- 
counts ?  This  will  be  answered  by  the  Daily  Balance  Book.  What 
amount  has  he  now  under  discount  ?  This  will  be  answered  from  the 
Discount  Ledger,  and  will  suggest  other  inquiries.  Is  that  amount  greater 
or  less  than  usual  ?  What  proportion  does  that  amount  bear  to  the  aver- 
age amount  of  his  cash  balance  ?  Is  the  amount  chiefly  upon  few  parties, 
or  is  it  divided  among  a  number  ?  Have  their  bills  been  discounted 
chiefly  upon  the  strength  of  the  customer,-  or  upon  the  strength  of  other 
parties  ?  Are  his  bills  generally  paid  ?  He  will  then  proceed  to  inquire 
about  the  other  parties  to  the  bill.  What  is  the  character  of  the  accepter 
in  the  Information  Book  ?  What  is  the  nature  of  the  transactions  between 
the  customer  and  the  accepter,  as  far  as  can  be  ascertained  ?  Has  he 
had  any  bills  upon  him  before,  and  have  they  been  punctually  paid  ? 
Are  there  any  bills  upon  him  now  running,  and  how  soon  will  they  be- 
come due  ? 

In  the  discount  of  bills  it  is  necessary  to  guard  against  forgeries.  It 
has  happened  that  parties  carrying  on  a  great  business  in  London,  have 
presented  to  their  banker,  for  discount,  bills  drawn  upon  all  parts  of  the 
country ;  which  bills,  upon  inquiry,  have  turned  out  to  be  purely  fictitious. 
This  is  an  additional  reason  for  bankers  making  inquiry  about  the  accep- 
ters of  the  bills  they  discount,  even  when  they  think  they  have  reason  to 
be  satisfied  with  the  drawers.  Even  this  is  no  protection  against  forgery. 
Sometimes  the  name  of  a  most  respectable  house  in  a  provincial  town  has 
been  forged.  Where  the  amount  is  large,  therefore,  it  seems  advisable  to 
send  the  bill  down  to  some  banker  in  the  town,  and  ask  his  opinion  as  to 

21 


A  Treat  ist  on  Banking. 

the  genuineness  of  the  signature.  Of  r»urs<-  in  thosr,  and  many  other 
case*  in  which  a  banker  is  liable  to  be  cheated,  much  must  depend  upon 
personal  discretion ;  no  rules  can  be  given  for  oil  case*. 

To  facilitate  the  detection  of  forged  CHEQUES,  it  is  advisable  that  the 
banker  should  have  a  primed  number  placed  on  every  cheque,  in  every 
cheque  book,  and  keep  a  record  of  the  name  of  the  customer  to  whom 
eacir  book  is  given.  When  a  cheque  with  n  forged  signature  appears,  tli<- 
hanker  can  then  turn  to  this  registry,  and  see  to  which  of  his  customers 
he  had  given  out  this  cheque.  This  plan  has  been  found  useful  in  tracing 
forgeries  that  have  been  perpetrated  by  the  clerks  or  servants  of  the  party 
keeping  the  account.  Some  bankers,  moreover,  place  on  their  cheque 
books  a  printed  label,  requesting  the  customer  will  at  all  times  keep  the 
book  under  his  own  lock  and  key. 

To  guard  against  forgery  in  the  case  of  DEEDS  or  BONDS,  all  these  docu- 
ments should  be  witnessed  by  an  officer  of  the  bank.  And  when  a  letter 
of  guarantee  is  given  by  a  third  party,  it  should  not  be  taken  by  the 
banker  from  the  party  in  whose  favor  it  is  given,  but  the  letter -should  be 
signed  at  the  bank,  and  the  signature  witnessed  by  one  of  the  clerks. 

A  banker  is  also  liable  to  loss  from  the  alteration  of  cheques.  The 
words  six,  seven,  eight,  and  nine,  can  easily  be  changed  by  the  addition 
of  y,  or  ty,  into  sixty,  seventy,  eighty,  or  ninety.  Sometimes,  too,  when 
cheques  are  drawn  for  less  than  £  10,  if  a  space  be  left  open  before  the 
word,  another  word  may  be  introduced.  Thus,  a  short  time  ago  a  cheque 
was  drawn  on  a  banker  for  £  3,  and  the  party  who  obtained  it  wrote  the 
word  sixty  before  the  word  three,  and  thus  cheated  the  banker  out  of 
£  60.  Letters  of  credit,  as  well  as  cheques,  have  heretofore  been  altered, 
by  the  original  sum  being  taken  out,  and  a  larger  sum  being  substituted. 
This  is  now  prevented  by  staining  the  paper  with  a  chemical  preparation. 
Country  banks  also  stamp  upon  their  drafts  the  words  "  under  ten  pounds," 
44  under  twenty  pounds,"  and  so  on,  to  prevent  an  alteration  to  any  sum 
beyond  those  amounts. 

The  re-discounting  of  bills  of  exchange  is  an  operation  of  much  im- 
portance, and  has  a  great  influence  on  the  monetary  operations  of  the 
country.  We  quote  from  a  former  work  of  our  own  upon  this  subject :  — 

"  Banks  situated  in  agricultural  districts  have  usually  more  money  than  they  can 
employ.  Independently  of  the  paid-up  capital  of  the  bank,  the  sums  raised  bv  circula- 
tion mad  deposits  are  usually  more  than  the  amount  of  their  loans  and  discounts. 
Banks,  on  the  other  hand,  that  are  situated  in  manufacturing  districts,  can  usually  cm- 
ploy  more  money  than  they  can  raise.  Hence.,  the  bank  that  has  a  superabundance  of 
money,  sends  it  to  London,  to  be  employed  by  the  bill-brokers,  usually  receiving,  in  re- 
turn, bills  of  exchange.  The  bank  that  wonts  money  sends  its  bills  of  exchange  to 
London,  to  be  re-discounted.  These  banks  thus  supply  each  other's  wants,  through 
the  medium  of  the  London  bill-brokers."  (The  Ilistoru  of  Banking  in  America,  by 
J.  W.  Gilbmrt; 

But  this  principle  of  the  re-discount  of  bills  has  been,  in  some  cases, 
grossly  abused,  by  being  employed  to  give  a  sort  of  vitality  to  dead  loans. 
A  country  banker  lends  upon  mills  and  manufactories  a  larger  amount  of 
money  than  he  can  conveniently  spare  ;  then  he  asks  the  manufacturer  to 
accept  a  bill  for  the  amount,  which  the  banker  gets  discounted  in  London 
or  elsewhere.  This  bill,  when  due,  is  renewed,  and  the  renewal  is  again 

22 


Administration  of  a  Bank. 

replaced  by  another,  and  so  the  game  goes  on.  As  long  as  money  is 
abundant  all  parties  are  pleased  ;  the  manufacturer  gets  his  advance,  the 
banker  gets  his  commission,  and  the  London  bill-broker  gets  employment 
for  his  funds.  But  a  pressure  comes.  The  London  bill-broker  can  dis- 
cpunt  no  more,  because  the  funds  placed  in  his  hands  by  his  depositors 
have  been  withdrawn.  The  banker  cannot  get  the  new  bills  discounted 
elsewhere,  and  is  unable  to  take  up  the  old  bills  that  are  returned  to  him 
with  his  indorsement.  The  manufacturer,  of  course,  cannot  pay  the 
money ;  the  banker  stops  payment,  and  the  manufacturer  is  ruined. 
The  places  at  which  this  system  has  been  chiefly  carried  on,  are  Man- 
chester and  Newcastle-upon-Tyne ;  and  it  is  in  these  places  that  the 
greatest  failures  have  taken  place  among  the  joint-stock  banks.  In  fact, 
I  believe  it  must  be  confessed,  that  the  joint-stock  banks  have  carried  on 
this  practice  to  a  much  greater  extent  than  it  was  ever  carried  on  by  the 
private  bankers.  This  has  arisen  from  the  greater  credit  which  they  pos- 
sessed :  it  is  one  of  the  forms  of  the  abuse  of  credit 

A  London  banker  is  always  anxious  to  avoid  dead  loans.  Loans  are 
usually  specific  advances  for  specified  times,  either  with  or  without 
security.  In  London,  advances  are  generally  made  by  loans ;  in  the 
country,  by  overdrafts.  The  difference  arises  from  the  different  modes 
of  conducting  an  account.  In  London,  the  banker  is  paid  by  the  balance 
standing  to  the  credit  of  the  account.  A  customer  who  wants  an  ad- 
vance, takes  a  loan  of  such  an  amount  as  shall  not  require  him  to  keep 
less  than  his  usual  balance.  The  loan  is  placed  to  the  credit  of  his  cur- 
rent account,  until  the  time  arrives  for  its  repayment,  and  then  he  is 
debited  for  the  principal  and  the  interest.  The  country  banker  is  paid 
by  a  commission,  and  hence  the  advance  to  a  customer  is  made  by  his 
overdrawing  the  account,  and  he  is  charged .  interest  only  on  the  amount 
overdrawn. 

Loans  are  divided  into  short  loans  and  dead  loans.  Short  loans  are 
usually  the  practice  of  the  London  bankers :  a  time  is  fixed  for  their  re- 
payment. Dead  loans  are  those  for  the  payment  of  which  there  is  no 
specified  time ;  or  where  the  party  has  failed  to  make  the  repayment  at 
the  time  agreed  upon.  In  this  case,  too,  the  loan  has  usually  been  made 
upon  dead,  —  that  is,  upon  inconvertible,  security.  Without  great  caution 
on  the  part  of  the  banker,  short  loans  are  very  apt  to  become  dead  loans. 
A  loan  is  first  made  for  two  or  three  months ;  the  time  arrives,  and  the 
customer  cannot  pay ;  then  the  loan  is  renewed,  and  renewed,  and  re- 
newed, and  ultimately  the  customer  fails,  and  the  banker  has  to  fall  back 
upon  his  securities.  The  difference  between  short  loans  and  dead  loans 
may  be  illustrated  by  a  reference  to  Liverpool  and  Manchester.  The 
Liverpool  bankers  make  large  advances  by  way  of  loan,  but  usually  on 
the  security  of  cotton.  The  cotton  is  sold  in  a  few  months,  and  the 
banker  is  paid.  At  Manchester,  the  banker  advances  his  loans  on  the 
security  of  mills  and  manufactories ;  he  cannot  get  repaid ;  and  after 
awhile  the  customer  fails,  and  the  mill  or  manufactory,  when  sold,  may 
not  produce  half  the  amount  of  the  loan. 

Dead  loans  are  sometimes  produced  by  lending  money  to  rich  men. 
A  man  of  moderate  means  will  be  anxious  not  to  borrow  of  his  banker  a 

23 


A  Treatise  on  Banking. 

loan  which  he  will  not  be  able  punctually  to  repay,  as  the  good  opinion 
of  his  banker  is  necessary  to  his  credit.  Hut  a  man  of  property  has  no 
scruples  of  the  kind  ;  he  has  to  Iniild  a  hoti^>,  to  improve  his  estate,  or  to 
extend  his  manufactory  ;  and  he  is  unreasonable  cnun^li  to  t  \p«rt  that  his 
banker  will  supply  him  with  thn  necessary  funds,  lie  believes  it  will  be 
only  a  temporary  advance,  as  he  will  shortly  be  in  possession  of  ample 
meaiu.  The  banker  lends  the  sum  at  first  desired  ;  more  money  is  want- 
ed; the  expected  supplies  do  not  arrive,  and  the  advance  becomes  a  di-.-nl 
lock-up  of  capital.  The  loan  may  be  very  safe,  and  yield  a  good  rate  of 
interest,  but  the  banker  would  rather  have  the  money  under  Ins  <>\\u  con- 
trol. 

Dead  loans  are  sometimes  produced  by  lending  money  to  parties  to  buy 
shares  in  public  companies.  There  was  too  much  business  of  this  kind 
transacted  by  some  bankers  a  few  years  ago.  The  party  did  not  at  first, 
perchance,  apply  to  his  banker  to  enable  him  to  purchase  the  shares ;  but 
the  calls  were  heavy,  and  his  ready  money  was  gone  ;  he  felt  assured, 
however,  that  in  a  short  time  he  should  be  able  to  sell  his  shares  at  a  high 
profit ;  he  persuaded  his  banker  to  pay  the  calls,  taking  the  shares  as  se- 
curity. Other  calls  were  made,  which  the  banker  had  to  pay.  The 
market  fell,  and  the  shares,  if  sold,  would  not  pay  the  banker's  advances. 
The  sale,  too,  would  have  caused  an  enormous  loss  to  the  customer.  The 
advances  became  a  dead  loan,  and  the  banker  had  to  wait  till  a  favorable 
opportunity  occurred  for  realizing  his  security. 

In  this,  and  in  other  ways,  a  banker  has  often  much  difficulty  with  cus- 
tomers of  a  speculative  character.  If  he  refuse  what  they  ask,  they  re- 
movp  their  account,  and  give  him  a  bad  name  ;  if  he  grant  them  their  de- 
sires, they  engage  in  speculations  by  which  they  are  ruined,  and  probably 
the  banker  sustains  loss.  The  point  for  the  banker  to  decide  is,  whether 
he  will  lose  them  or  ruin  them.  It  is  best,  in  this  case,  for  the  banker  to 
fix  upon  what  advance  he  should  make  them,  supposing  they  conduct 
their  affairs  prudently  ;  and  if  they  are  dissatisfied  with  this,  he  had  better 
let  them  go  ;  after  they  have  become  bankrupts  he  will  get  credit  for  his 
sagacity. 

The  discounting  of  bills  is  an  ordinary  matter  of  business,  and  the 
banker  has  only  to  see  that  he  has  good  names  to  his  bill  ;  hut  in  regard 
to  loans,  a  banker  would  do  well  to  follow  the  advice  which  Mr.  Taylor 
gives  to  individuals,  and  not  make  a  loan,  unless  he  knows  the  purpose  for 
which  it  is  borrowed,  and  to  form  his  own  judgment  as  to  the  wisdom  of 
the  party  who  borrows,  and  as  to  the  probability  of  his  having  the  means 
of  repayment  at  the  time  agreed  upon. 

"  Never  lend  money  to  a  friend,  unless  you  are  satisfied  that  he  does  wisely  and  well 
in  borrowing  it.  Borrowing  is  one  of  the  most  ordinary  ways  in  which  weak  men 
sacrifice  the  future  to  the  present;  and  thence  it  u  that  the  (..'rutim-le  fur  a  loan  is  so 
proverbially  evanescent;  for  the  future,  becoming  present  in  its  turn,  will  not  be  well 
pleased  with  those  who  have  assisted  in  doing  it  an  injury.  Hy  .  ..r.-jiirin-  with  your 
friend  to  defraud  his  future  self,  yon  naturally  incur  hi-  future  ili^.i.  usure.  To  with- 
stand solicitations  for  loans  is  often  a  great  tri.il  of  firmness ;  the  n  .lly  as 
the  pleas  and  pretexts  alleged  are  generally  made  plaiiMhle  at  tin  <  \|>c  n-c  of  truth; 
for  nothing  breaks  down  a  man's  trath/olness  more  surely  than  j.r<  uni.uy  embarrass- 
ment,— 

24 


Administration  of  a  Bank. 

'An  un thrift  was  a  liar  from  all  time; 
Never  was  debtor  that  was  not  deceiver.' 

The  refusal  which  is  at  once  the  most  safe  from  vacillation,  and  perhaps  as  little  apt 
to  give  offence  as  any,  is  the  point  blank  refusal,  without  reasons  assigned.  Acquies- 
cence is  more  easily  given  in  the  decisions  of  a  strong  will  than  in  reasons,  which  weak 
men,  under  the  bias  of  self-love,  will  always  imagine  themselves  competent  to  contro- 
vert." (Notes  on  Life,  by  John  Taylor.) 

Sometimes,  when  an  advance  of  money  is  wanted  for  two  or  three 
months,  the  party  gives  a  note  of  hand.  This  is  better  than  a  mere  loan, 
as  it  fixes  the  time  of  payment,  and  keeps  the  transaction  fresh  in  the  rec- 
ollection of  the  borrower.  But  care  must  be  taken  that  the  note,  by  re- 
peated renewals,  does  not  in  fact  become  a  dead  loan.  Hence,  when  a 
renewal  cannot  be  avoided,  attempts  should  be  made  to  reduce  the  amount. 
When  public  companies,  of  only  a  short  standing,  and  not  fully  constituted, 
wish  to  borrow  money  of  their  banker,  it  is  sometimes  expedient  to  take 
the  joint  and  several  promissory  note  of  the  directors.  By  this  means  the 
banker  avoids  all  knotty  questions  connected  with  the  law  of  partnership ; 
and  the  directors  will,  for  their  own  sakes,  see  that  the  funds  of  the  com- 
pany shall,  in  due  time,  be  rendered  available  for  the  repayment  of  the 
loan. 

We  have  said  that  dead  loans  are  usually  advanced  upon  inconvertible 
security.  Sometimes  that  security  consists  of  a  deposit  of  deeds  relating 
to  leasehold  or  freehold  property.  In  London,  however,  this  kind  of  se- 
curity is  not  considered  desirable,  and  the  following  rules  are  usually  ob- 
served. 

No  advances  are  made  upon  the  security  of  deeds  alone  ;  they  are 
taken  only  as  collateral  security,  and  then  only  to  cover  business  transac- 
tions, and  in  cases  where  the  parties  are  supposed  to  be  safe  independently 
of  deeds. 

The  value  of  the  property  should  be  much  higher  than  the  sum  it  is  in- 
tended to  guarantee.  When  this  is  the  case,  and  the  parties  fail,  their 
creditors  may  take  the  deeds  and  pay  the  debt  due  to  the  bank.  The 
main  use  of  taking  deeds  is  to  have  something  to  fall  back  upon  in  this 
way.  A  customer  should  never  receive  more  accommodation  from  hav- 
ing deposited  his  deeds  than  that  to  which  he  is  legitimately  entitled.  No 
banker  takes  deeds  if  there  is  the  slightest  probability  of  his  being  com- 
pelled to  realize  the  property,  as  the  legal  difficulties  are  very  great. 

In  all  cases  in  which  deeds  are  taken,  they  are  submitted  to  the  inspec- 
tion of  the  banker's  solicitor,  who  makes  a  written  report  upon  the  value 
of  the  property,  as  far  as  it  can  be  discovered  by  the  deeds,  and  upon  its 
legal  validity  as  a  security  to  the  bank. 

The  rule  of  a  banker  is,  never  to  make  any  advances,  directly  or  indi- 
rectly, upon  deeds,  or  any  other  dead  security.  But  this  rule,  like  all  other 
general  rules,  must  have  exceptions,  and  when  it  is  proper  to  make  an  ex- 
ception is  a  matter  that  must  be  left  to  the  discretion  of  the  banker.  He 
should,  however,  exercise  this  discretion  with  caution  and  prudence,  and 
not  deviate  from  the  rule  without  a  special  reason  to  justify  such  devia- 
tion. 

Among  country  bankers,  in  agricultural  districts,  advances  upon  deeds 
c  25 


A  Treat  ue  on  Banking. 

are  not  considered  so  objectionable  as  in  London.  A  landed  proprietor 
who  wants  a  temporary  advance  places  his  deeds  in  the  hands  of  Ins 
banker,  and  takes  what  he  requires.  The  banker  thinks  hi-  r,ui  hnvc  no 
better  security  ;  but  the  loon  is  usually  for  only  a  moderate  amount,  and 
is  paid  off  within  a  reasonable  time.  In  the  country  the  charm-ii  r  ami  cir- 
cumstances  of  every  man  is  known.  A  landlord  who  wants  an  advance 
to  meet  immediate  demands,  until  his  rents  come  in,  seems  fairly  entitli •<! 
to  assistance  from  his  banker.  But  should  a  landlord  who  is  living  be- 
yond his  income  ask  for  an  advance  almost  equal  to  the  value  of  his 
deeds,  he  would  not  be  likely  to  obtain  it.  Every  banker  is  aware  that 
when  deeds  are  lodged  as  security  for  loans,  or  discounts  of  any  kind,  in- 
terest upon  the  advance  cannot  be  charged  at  a  higher  rate  than  five  per 
cent. 

Another  kind  of  security  is  bills  of  lading,  and  dock  warrants.  Ad- 
vances upon  securities  such  as  these  must  be  considered  as  beyond  the 
rules  which  prudent  bankers  lay  down  for  their  own  government ;  they 
can  only  be  justified  by  the  special  circumstances  of  each  case.  In  aa- 
vancing  upon  bills  of  lading,  the  banker  must  see  that  he  has  all  the  bills 
of  the  tet ;  for  if  he  has  not  a//,  the  holder  of  the  absent  bill  may  get  pos- 
session of  the  property.  It  is  also  necessary  that  he  have  the  policy 
of  insurance,  that,  in  case  the  ship  be  lost,  he  may  claim  the  value  from 
the  insurers.  In  advances  upon  dock  warrants,  the  banker  should  know 
that  the  value  of  the  goods  is  equal  to  his  advances,  and  will  also  give 
him  a  margin,  as  a  security  against  any  fall  in  the  market  price.  But,  in 
truth,  no  banker  should  readily  make  advances  upon  such  securities. 
Now  and  then  he  may  take  them  as  collateral  security,  for  an  advance 
to  a  customer  who  is  otherwise  respectable ;  but  if  a  customer  requires 
such  advances  frequently,  not  to  say  constantly,  it  shows  that  he  is  con- 
ducting his  business  in  a  way  that  will  not  ultimately  be  either  for  his  own 
advantage  or  that  of  his  banker. 

A  banker  should  never  make  any  advances  upon  life  policies.  They 
may  become  void,  should  the  party  commit  suicide,  or  die  by  the  hand  of 
justice,  or  in  a  duel ;  or  if  he  go  without  permission  to  certain  foreign 
countries.  The  payment  may  be  disputed,  upon  the  ground  that  some 
deception  or  concealment  was  practised  when  the  policy  was  obtained. 
And,  in  all  cases,  they  are  dependent  upon  the  continued  payment  of  the 
premiums.  The  value  of  a  policy,  too,  is  also  often  overrated.  The  in- 
sured fancies  that  his  policy  increases  in  value  in  exact  proportion  to  the 
number  of  premiums  he  has  paid  ;  but  if  he  offers  it  to  the  company,  he 
will  find  that  he  gets  much  less  than  he  expected.  The  policy  is  valued 
in  a  way  that  remunerates  the  office  for  the  risk  they  have  run  during  the 
years  that  are  past ;  and  the  valuation  has  a  reference  only  to  the  future. 
Thus,  if  a  man  at  twenty  years  of  age  insures  his  life,  the  expectation,  or 
probability  of  life,  as  it  is  called,  that  is,  the  number  of  years  he  is  likely 
to  live  upon  the  general  average,  is,  according  to  the  Northampton  tables, 
thirty-three.  If  he  wishes  his  representatives  to  receive  £  1,000  at  his 
death  he  will  pay  a  proportionate  annual  premium.  When  forty  years  of 
age,  he  will  have  paid  twenty  premiums,  and  he  may  fancy  that  his  pol- 
icy is  worth  the  total  amount  of  the  premiums.  But  the  policy  is  valued, 

26 


Administration  of  a  Bank. 

not  with  reference  to  the  past,  but  with  reference  to  the  future.  At  forty 
years  of  age  his  "  expectation  of  life  "  is  not  thirteen,  but  twenty-three 
years.  It  is  then  calculated  that  twenty-three  years  hence  the  policy  will 
be  entitled  to  £  1,000  ;  but  that  the  annual  premiums  must  be  paid  in  the 
mean  time.  The  value  of  the  policy,  therefore,  is  the  present  value  of 
this  £  1,000,  less  the  present  value  of  all  these  annual  payments.  Should 
he  wish  to  sell  his  policy  when  he  is  sixty  years  of  age,  he  will  find  that 
it  is  proportionably  less  valuable,  for  his  expectation  of  life  will  still  be 
thirteen  years.  A  short  rule  for  ascertaining  the  expectation  of  life,  ac- 
cording to  the  Northampton  tables,  is  to  take  the  age  from  the  number 
eighty-six,  and  then  divide  by  two.  The  value  of  a  policy  is  generally 
about  one  third  of  the  amount  of  all  the  premiums  that  have  been  paid. 

There  are  certain  signs  of  approaching  failure,  which  a  banker  must 
observe  with  reference  to  his  customers.  Thus,  if  he  keep  a  worse  ac- 
count than  heretofore,  and  yet  wants  larger  discounts,  —  if  the  bills  of- 
fered for  discount  are  drawn  upon  an  inferior  class  of  people,  —  if,  when 
his  bills  are  unpaid,  he  does  not  take  them  up  promptly,  —  if  he  pays  in 
money  late  in  the  day,  just  in  time  to  prevent  his  bills  or  cheques  being 
returned  through  the  clearing ;  but,  above  all,  if  he  is  found  cross-firing, 
that  is,  drawing  bills  upon  parties  who  at  the  same  time  draw  bills  upon 
him ;  as  soon  as  a  banker  detects  a  customer  in  fair  credit  engaged  in 
this  practice,  he  should  quietly  give  him  reason  for  removing  his  account. 

Sometimes  two  parties,  who  keep  different  bankers,  will  adopt  a  prac- 
tice of  exchanging  cheques.  Their  cheques  are  paid  into  the  banks  too 
late  to  be  cleared  on  the  same  day ;  and  hence  the  parties'  accounts  ap- 
pear better  the  next  day  than  they  otherwise  would  be.  Some  failing 
parties,  too,  have  recourse  to  forged  or  fictitious  bills,  which  they  put  into 
circulation  to  a  large  amount.  The  best  way  for  a  banker  to  guard 
against  loss  from  this  practice  is,  to  inquire  in  all  cases  about  the  accept- 
ers of  the  bills  that  he  discounts,  not  only  when  his  customers  are  doubt- 
ful, but  even  when  they  are  deemed  respectable.  Indeed,  it  is  only  peo- 
ple in  good  credit  that  can  pass  fictitious  bills. 

The  banker's  rule  is,  that  they  who  have  discounts  must  keep  a  propor- 
tionate balance  ;  this  is  useful,  as  the  amount  of  balance  kept  is  an  indi- 
cation of  the  circumstances  of  the  party.  When  a  customer  has  heavy 
discounts,  and  keep  but  a  small  balance,  it  may  usually  be  inferred  that 
he  is  either  embarrassed  in  his  affairs,  or  he  is  trading  beyond  his  capital. 

The  operation  which  is  called  "  nursing  an  account,"  sometimes  re- 
quires considerable  prudence,  tact,  and  perseverance.  A  banker,  having 
made  considerable  advances  to  a  customer,  suddenly  discovers  that  the 
party  is  not  worthy  of  the  confidence  he  has  placed  in  him.  If  these  ad- 
vances should  be  called  up  or  discontinued,  the  customer  will  break,  and 
the  banker  sustain  loss.  The  banker  must  be  governed  by  the  circum- 
stances of  each  case.  It  is  sometimes  best  to  continue  to  discount  the 
good  bills,  and  refuse  those  of  a  different  character ;  and  thus  gradually 
weed  the  account  of  all  the  inferior  securities.  Sometimes  he  may  get 
the  customer  to  stipulate  that  he  will  diminish  his  advances  by  certain 
fixed  amounts,  at  certain  periods ;  and  thus,  by  alternately  refusing  and 
complying,  the  banker  may  at  length  place  himself  in  a  state  of  security 

27 


A  Trtatite  en  Banking. 

At  other  time*,  the  banker  mny  offer  to  nuiko  still  furthrr  advances,  on 
condition  of  receiving  good  security  also  for  what  has  IM-I-M  already  ad- 
vanced.  This  plan  is  advisable  when  the  additional  advance  is  not  pro- 
portionately large,  and  the  security  is  not  inconvertible,  other\\  .-••  the 
plan  is  somtimes  a  hazardous  one.  It  requires  some  courage  to  look  a 
loss  in  the  face.  And  it  has  occurred  that  a  banker,  rather  than  Mi-tain  a 
small  low,  will  consent  to  make  a  further  large  advance  upon  inn  n- 
vertible  security;  and  the  locking  up  of  this  large  advance  for  an  indefi- 
nite period  has  proved  the  greater  evil  of  the  two.  In  fuel,  some  of  the 
largest  losses  of  fallen  banks  have  been  made  in  this  way.  Tin  \  have, 
in  the  first  instance,  made  an  imprudent  advance ;  rather  than  sustain  this 
loss  at  once,  they  havo  made  a  further  advance,  with  a  view  to  pn-\.  nt  it. 
The  advance  has  at  lost  become  so  lar^e,  that  if  the  customer  fulls  the. 
bank  must  fall  too.  For  the  sake  «>('  sell-existence,  further  advances  are 
then  made ;  these,  too,  are  found  ineffectual,  and  ultimately  the  customer 
and  the  bank  fall  together. 


SECTIOM  V.  — THE  ADMINISTRATION  OF  A  BANK  WITH  RE 
GARD  TO  PROCEEDINGS  ON  BILLS  OF  EXCHANGE. 

WHEN  a  banker  has  discounted  a  bill,  it  is  handed  to  the  accountant, 
who  will  see  that  it  is  drawn  on  a  right  stamp.  The  accountant  will  read 
it  through,  and  see  that  it  is  properly  drawn,  and  will  observe  that  the  sum 
in  writing  corresponds  with  the  sum  expressed  in  figures,  and  that  no 
alteration  has  taken  place  in  the  amount,  the  date,  the  term,  or  the  place 
at  which  it  is  made  payable  ;  for  these  are  material  alterations,  and  would 
affect  the  validity  of  the  bill.  He  will  then  calculate  the  time  at  which  it 
falls  due,  and  place  this  date  upon  the  bill,  or,  if  it  was  there  before,  he 
will  check  it,  and  see  that  it  is  right.  He  will  then  turn  it  over  and  see 
that  it  is  indorsed  by  the  party  in  whose  favor  it  is  drawn,  and  also  that 
the  subsequent  indorsements  are  regular  and  properly  spelled  ;  for  if  there 
be  a  variation  of  a  single  letter  in  the  spelling  of  a  name,  the  payment  of 
the  bill  could  not  be  legally  enforced.  He  will  also  observe  that  the  bill 
is  indorsed  by  the  party  for  whom  it  is  discounted.  He  will  then  pass  the 
bill  through  the  books  (these  books  arc  described  in  the  section  on  Bank- 
ing Book-keeping),  and  at  the  close  of  the  day  deliver  it  with  the  others 
to  the  banker.  The  banker  will,  on  the  following  morning,  put  these  bills 
away  in  his  bill-case  according  to  the  dates  at  which  they  fall  due.  This 
point  should  be  recollected  by  persons  who  have  to  get  bills  from  a  banker 
before  they  are  due ;  for,  after  they  have  given  the  amount  and  the  names, 
the  next  question  asked  them  will  be,  "  When  is  it  due  ?  "  for,  among  a 
multitude  of  bills,  the  only  way  of  readily  finding  any  individual  bill  is  to 
turn  to  those  that  fall  due  on  the  same  day.  Every  day  the  banker  looks 
out  the  bills  that  fall  due  on  the  following  day,  and  hands  them  to  the 
chief  clerk  (or,  in  some  cases,  the  chief  clerk  himself  has  the  charge  of 
the  bills),  who,  after  checking  them  against  the  books,  distributes  them 

28 


Bills  of  Exchange. 

among  the  clerks  who  are  to  collect  them.  If  the  bill  be  not  paid,  it  is 
noted  on  the  same  evening,  and  on  the  following  morning  returned  to  the 
customer  for  whom  it  was  discounted,  and  his  account  is  debited  for  the 
amount.  But  if  the  party  has  not  the  sum  to  his  credit,  and  the  banker 
does  not  like  to  trust  him,  he  merely  receives  notice  of  its  dishonor  ;  and 
notice  is  also  given  to  every  other  party  to  the  bill,  with  a  demand  for 
immediate  payment.  The  bill  has  now  become  that  hated  object,  a 
"  past  due  bill  "  ;  and  after  a  while,  if  the  parties  are  supposed  to  be 
"  worth  powder  and  shot,"  it  is  handed  to  the  bank's  solicitor. 

I  shall  give  a  short  description  of  Bills  of  Exchange,  and  notice  a  few 
of  those  points  of  law  and  of  business  which  are  of  most  importance  to 
practical  bankers. 

A  bill  of  exchange  is  a  written  order  from  one  person  to  another,  direct- 
ing him  to  pay  a  sum  of  money  either  to  the  drawer  or  to  a  third  person 
at  a  future  time.  This  is  usually  a  certain  number  of  days,  weeks,  or 
months,  either  after  the  date  of  the  bill,  or  after  sight  ;  that  is,  after  the 
person  on  whom  it  is  drawn  shall  have  seen  it,  and  shall  have  written  on 
the  bill  his  willingness  to  pay  it.  The  party  expresses  this  willingness  by 
writing  on  the  bill  the  word  "  accepted,"  and  his  name.  If  the  bill  be 
drawn  after  sight,  he  also  writes  the  date  of  the  acceptance. 

If  the  party  in  whose  favor  the  bill  is  drawn  wishes  to  transfer  it,  he 
writes  his  name  on  the  back.  This  is  called  an  indorsement  ;  and  may 
be  either  special  or  general.  A  special  indorsement  is  made  to  a  par- 
ticular party  ;  as,  "  Pay  to  Messrs.  John  Doe  &  Co.  or  order."  A  general, 
or  blank  indorsement,  is  when  the  person  merely  writes  his  name.  It 
is  held  by  the  lawyers  (see  Chitty  on  Bills  of  Exchange,  p.  103)  that  a 
special  indorsement  cannot  follow  a  general  indorsement,  and  that  in  such 
a  case  the  holder  may  sustain  an  action  for  the  amount,  though  the  bill  be 
not  indorsed  by  the  party  to  whom  it  is  thus  specially  assigned.  In  prac- 
tice, however,  this  is  very  common  ;  and  bankers  always  refuse  to  pay 
bills  not  properly  indorsed,  even  though  previous  indorsements  may  be 
general.  But,  in  regard  to  post  bills,  the  Bank  of  England  pays  no  regard 
to  any  special  indorsement  that  may  follow  a  general  indorsement. 

The  following  is  the  form  of  a  Bill  of  Exchange  :  — 

£  1,000.  London,  1st  of  May,  1827. 

Two  months  after  date,  pay  to  the  order  of  Messrs.  Quick,  Active,  Sf  Co.  (or 
me  or  mu  order)  the  sum  of  One  Tliousand  Pounds,  for  value  received. 

Hearty,  Jolly,  fr  Co. 

Accepted,  payable  at 

To  Messrs.  John  Careful  fr  Co.,  Messrs.  Steady  fr  Co.,  Bankers. 

Southwark.  John  Careful  fr  Co. 

A  Promissory  Note  is  as  follows  :  — 

£  1,000.  London,  1st  of  May,  1827. 

Two  months  after  date,  we  promise  to  pay  Messrs.  Hearty,  Jolly,  fr  Co.,  or  their 
order,  the  sum  of  One  Thousand  Pounds,  for  value  received. 

John  Careful  fr  Co. 
At  Messrs.  Steady  fr  Co.,  Bankers, 


The  acceptance  is  usually  written  across  a  bill,  but  should  always  be  on 
c*  29 


A   Treatise  on  Banking. 

the  front,  not  on  the  back  of  the  bill.     An  indorsement,  as  the  name  im- 
plies, should  be  placed  on  the  back. 

The  person  who  draws  a  bill  is  called  the  drawer ;  the  person  on  whom 
it  is  drawn  is  called  the  drawee  ;  after  the  bill  is  accepted  the  drawee  is 
called  the  accepter.  The  person  who  indorses  a  bill  is  called  the  indorser ; 
the  person  to  whom  it  is  indorsed  is  the  indorsee.  The  person  who  pays 
a  bill  is  the  payer ;  the  person  to  whom  it  is  paid  is  the  payee.  These  and 
similar  terms  may  be  illustrated  by  a  circumstance  said  to  have  occurred 
on  the  cross-examination  of  a  witness,  on  a  trial  respecting  a  mortgage. 
Counsellor,  "  Now,  Sir,  you  ore  a  witness  in  this  case  ;  pray  do  you 
know  the  difference  .between  the  mortgager  and  the  mortgagee  ?"  Wit' 
HIM,  u  To  be  sure  I  do.  For  instance,  now  suppose  I  nod  at  you,  I  am 
the  nod-er,  and  you  are  the  nod-ee."  The  word  discountee,  denoting  the 
person  for  whom  a  bill  is  discounted,  is  not  used  in  England,  but  I  observe 
in  the  parliamentary  evidence  that  it  was  employed  by  some  of  the  wit- 
nesses from  Scotland 

All  bills,  except  those  payable  on  demand  or  at  sight,  are  allowed  three 
days'  grace.  Thus,  a  bill  drawn  at  two  months  from  the  1st  of  May  will 
fall  due  on  the  4th  of  July  ;  but,  if  that  day  be  a  Sunday  or  a  public  holi- 
day, the  bill  will  be  due  on  the  day  before.  Some  bills,  instead  of  being 
drawn  after  date  or  sight,  state  the  time  of  payment,  as  "  On  the  first  of 
August  pay,  &c."  These  bills  are  allowed  the  usual  three  days  of  grace. 
Such  a  bill  would  fall  due  on  the  4th  of  August. 

To  remove  all  doubts  upon  this  subject,  an  act  of  Parliament  was  passed 
(7th  and  8th  Geo.  IV.  ch.  5),  which  enacts,  "  that  from  and  after  the  tenth 
day  of  April,  one  thousand  eight  hundred  and  twenty-seven,  Good  Friday, 
and  Christmas-day,  and  every  day  of  fast  or  thanksgiving  appointed  by 
his  Majesty,  is  and  shall  for  all  purposes  whatever,  as  regards  bills  of  ex- 
change and  promissory  notes,  be  treated  and  considered  as  the  LordV 
day,  commonly  called  Sunday."  This  act  does  not  extend  to  Scotland, 
but  it  has  since  been  extended  to  Ireland.  This  act  does  not  vitiate  a  bill 
dated  on  a  Sunday. 

Some  parties,  when  they  indorse  a  bill,  write  at  bottom,  "  In  case  of 
need  apply  to  Messrs.  C.  D.  &  Co."  That  is,  if  the  bill  be  not  paid  when 
due,  Messrs.  C.  D.  &  Co.  will,  on  the  day  after  it  is  due,  pay  it  for  the 
honor  of  the  indoreers.  The  notaries  always  observe  the  "  cases  of  need  " 
upon  the  bills  that  come  into  their  hands,  and  apply  to  the  proper  parties. 
The  advantage  of  placing  a  case  of  need  upon  a  bill  is,  that  the  party  in- 
dorsing it  receives  it  back  sooner  in  case  of  non-payment.  It  also  makes 
the  bill  more  respectable,  and  secures  its  circulation. 

Were  it  not  for  the  space  it  occupies,  it  would  be  very  desirable  that 
the  indorser  of  a  bill  of  exchange  should  be  compelled  to  state  also  his  ad- 
dress. This  would  prevent  forged  and  fictitious  indorsements,  and  give  a 
banker  who  discounts  a  bill  a  better  opportunity  of  ascertaining  the  re- 
spectability of  the  parties.  In  cose,  too,  the  bill  was  unpaid,  he  might 
immediately  apply  to  all  the  indorsers,  whereas  now  he  has  to  find  them 
out  in  the  best  way  he  can.  The  indorsers  and  drawer  of  a  bill  would 
have  earlier  notice  of  its  non-payment,  and  have  a  better  opportunity  of 
obtaining  their  money  from  the  antecedent  parties. 

30 


Bills  of  Exchange. 

Bills  are  divided  into  Inland  and  Foreign.  Inland  bills  are  those  in 
which  both  the  drawer  and  the  accepter  reside  in  England.  Bills  drawn 
from  Scotland  or  Ireland  are  considered  as  foreign  bills.  If  a  foreign  bill 
be  refused  acceptance  or  payment,  it  should  be  immediately  protested  and 
returned.  An  inland  bill  is  only  noted,  and  then  only  when  refused  pay- 
ment. A  foreign  bill  may  be  accepted  verbally,  or  by  letter ;  but  no  ac- 
ceptance of  an  inland  bill  is  valid,  unless  written  upon  the  bill  itself. 

When  a  merchant  in  one  country  draws  bills  upon  a  merchant  residing 
in  another  country,  he  usually  draws  them  in  sets ;  that  is,  he  draws  two, 
three,  or  more  bills  of  the  same  tenor  and  date.  These  bills  are  sent  to 
his  correspondent  by  different  ships.  Thus,  he  secures  the  swiftest  con- 
veyance, and  his  remittances  will  not  be  delayed  by  any  accident  that 
may  happen  to  an  individual  ship.  In  drawing  these  bills,  it  is  always  ex- 
pressly stated  whether  each  bill  be  the  first,  second,  or  third  of  a  set ;  as, 
"  Pay  this  my  first  of  exchange  (the  second  and  third  not  being  paid)." 
On  the  payment  of  any  one  bill,  the  others  are  of  no  value.  If  a  mer- 
chant, say  at  Paris,  has  a  set  of  bills  drawn  on  a  merchant  at  London,  he 
will  sometimes  send  over  the  first  bill  to  his  correspondent  in  London,  to 
get  it  accepted,  and  to  retain  it  until  claimed  by  the  holder  of  the  second. 
The  merchant  at  Paris  will  then  "write  on  the  second  bill,  that  the  first  lies 
accepted  at  such  a  house  in  London.  He  will  then  sell  it,  or  pay  it  away. 
By  this  means,  he  is  sure  that  the  bill  he  negotiates  will  not  be  returned 
to  him,  and  greater  value  is  given  to  his  bill,  not  only  as  it  has  the  addi- 
tional security  of  the  accepter's  name,  but,  if  it  be  drawn  after  sight,  it 
will  become  due  so  much  the  sooner.  When  the  second  bill  arrives  in 
London,  the  holder  takes  it  to  the  house  where  the  first  is  deposited,  and 
it  is  immediately  given  up  to  him. 

Foreign  bills  are  often  drawn  at  a  "  usance  "  after  date.  A  usance 
from  Amsterdam,  Rotterdam,  Hamburgh,  or  any  place  in  Germany,  is 
one  month  ;  from  France,  thirty  days  ;  from  Spain  and  Portugal  two 
months  ;  from  Sweden,  seventy-five  days  ;  from  Italy,  three  months. 
Where  it  is  necessary  to  divide  a  month  upon  a  half  usance,  which  is  the 
case  when  the  usance  is  either  one  month  or  three,  the  half  month  is  al- 
ways fifteen  days.  Bills  drawn  from  Russia  are  dated  according  to  the 
old  style,  and  twelve  days  must  be  added  to  the  date  in  order  to  ascertain 
at  what  time  they  fall  due. 

A  bill  is  sometimes  accepted  for  the  honor  of  the  drawer,  or  of  one  of 
the  indorsers.  Thus,  if  a  bill  from  Hamburgh  be  drawn  upon  a  person 
in  London,  who  refuses  to  accept  it,  another  party,  knowing  the  drawer 
or  one  of  the  indorsers  to  be  a  respectable  man,  may  accept  the  bill  him- 
self, for  the  honor  of  the  party  with  whom  he  is  acquainted.  By  this 
means,  he  prevents  the  bill  being  returned,  with  expenses.  This  kind  of 
acceptance  renders  him  liable  to  pay  the  bill  on  the  day  after  it  is  due, 
but  he  can  afterwards  recover  the  amount  from  the  party  for  whose  honor 
he  has  accepted  it,  and,  of  course,  from  all  preceding  parties.  But,  to 
secure  himself,  he  must  not  accept  the  bill  until  after  it  has  been  protested 
for  non-acceptance,  and  he  must  write,  "  Accepted  for  the  honor  of  A. 
B.  &  Co."  upon  the  face  of  the  bill.  And  when  the  bill  is  due,  he  must 
not  pay  it  until  it  has  been  presented  for  payment  to  the  drawee. 

31  . 


A  Treatise  on  Banking. 

Bills  accepted,  and  mnde  payable  nt  a  banking-house,  in  tno 
manner,  without  the  addition  of  the  word  ONLY,  may  be  presented  cither  at 
the  banking-bouse,  or  at  the  residence  of  the  accepter.  In  either  case,  it  is 
a  legal  presentment  ( 1  As  2  Geo.  IV.  ch.  78),  as  far  as  regards  the  accepter. 
In  practice,  however,  bills  are  always  presented  at  the  place  where  they 
are  made  payable.  If  a  bill  be  addressed  to  a  banking-house  or  any  other 
place  ONLY,  the  payment  cannot  be  enforced  until  it  has  been  presented 
at  that  place.  If  any  particular  place  of  payment  be  mentioned  in  the 
body  of  a  promissory  note,  it  must  be  presented  there. 

When  bankers  receive  any  unaccepted  bills,  they  send  them  out  for 
acceptance,  if  they  have  four  days  to  run.  They  are  left  at  the  house  of 
the  drawee,  and  are  called  for  on  the  following  day.  On  the  day  the  bills 
are  due,  the  tellers  present  them  in  the  morning  at  the  place  where  they 
are  made  payable.  If  not  paid  when  presented,  they  leave  a  printed  no 
tice  or  direction,  of  which  the  following  is  a  copy :  — 

Dill  for  £ 
Drawn  by  Sir. 
On  Mr. 
Lie*  due  at  Mettrt.  Steady  &•  Co. 

A«.        Lombard  Street. 

Pirate  call  between  Two  and  Four  o'clock. 

If  not  paid  by  five  o'clock,  the  bill  is  sent  to  the  notary's.  It  is  brought  to 
the  banking-house  the  following  morning,  with  the  notary's  ticket  attached 
to  it,  stating  the  reason  why  it  is  not  paid.  The  bill  is  then  returned.  If 
it  be  a  foreign  bill,  that  is,  drawn  from  any  foreign  land,  it  must  be  pro- 
tested. Foreign  bills  are  also  protested  for  non-acceptance  ;  but  inland 
bills  are  not,  nor  even  noted,  but  the  party  who  remitted  the  bill  to  the 
banking-house  is  advised  of  the  circumstance. 

Bills  under  the  value  of  40*.  are  not  subject  to  the  stamp  duty  ;  nor  are 
drafts  upon  bankers  payable  to  bearer  on  demand,  provided  the  drafts  ore 
drawn  within  fifteen  miles  of  the  banking-house,  and  they  specify  such 
place,  and  bear  date  on  or  before  the  day  on  which  they  are  issued.  A 
person  drawing  a  cheque  beyond  this  distance,  is  subject  to  a  penalty  of 
£  100  ;  the  person  knowingly  receiving  it,  to  a  penalty  of  £  20  ;  and  the 
banker  paying  it  is  liable  to  a  penalty  of  £  100.  The  post-dating  of 
cheques  to  make  them  serve  the  purpose  of  bills  of  exchange  is  subject  to 
the  same  penalties.  (55  Geo.  HI.  ch.  184,  812,  813.) 

The  following  is  the  form  of  a  Draft  or  Cheque  :  — 

Jfh.  457.  London,  May  1,  1827. 

Mettrt.  Hope,  Rich,  fr  Co.,  Lombard  Street. 
Pay  John  Dot,  Etq-,  or  bearer,  the  turn  of  One  Hundred  Pounds. 
£  100  Peter  Thrifty  fr  Co. 

The  words  "  or  bearer"  are  essentially  necessary,  or  the  draft  must  be 
drawn  on  a  stamp,  and  indorsed  by  the  party  who  receives  it 

Bills  for  20*.  and  under  £  5  must  specify  the  name  and  residence  of 
the  payee  ;  they  must  be  payable  within  twenty-one  days  after  date,  and 
be  attested  by  one  subscribing  witness.  Every  indorsement  must  be  at- 

32 


Sills  of  Exchange. 

tested  by  a  witness  ;  and  must  specify  the  name  and  residence  of  the 
indorsee.  All  bills  drawn  for  a  less  sum  than  20s.  are  illegal. 

A  bill  given  for  an  illegal  consideration  cannot  be  enforced  by  the 
drawer,  but  it  may  be  enforced  by  an  innocent  holder  who  had  no  knowl- 
edge of  the  illegal  consideration,  and  who  received  the  bill  before  it  was 
due.  The  principal  illegal  considerations  are  those  arising  from  usury, 
gambling,  and  smuggling.  Bills  drawn  at  not  more  than  twelve  months 
after  date,  are  exempt  from  the  operation  of  the  laws  against  usury. 

The  following  is  the  Table  of  Stamp  Duties  upon  Bills  of  Exchange :  — 


4 

£ 

s. 

£    s. 

Amounting  to  2 

0  and  not  exceeding  5    5 

ct 

5 

5 

« 

20     0 

(C 

20 

0 

u 

30     0 

(1 

30 

0 

(1 

50     0 

<< 

50 

0 

ct 

100     0 

u 

100 

0 

(1 

200     0 

«( 

200 

0 

u 

300    0 

(( 

300 

0 

a 

500    0 

H 

500 

0 

11 

1000    0 

(I 

1000 

0 

d 

2000     0 

u 

2000 

0 

H 

3000     0 

• 

3000 

0 

" 



Not  exceeding 
2  months  after 
date,  or  60  days 
sight. 

Exceeding  2 
months  after 
dale,  or  60  days 
sight. 

£ 

8. 

d. 

£ 

s. 

d. 

0 

1 

0 

0 

1 

6 

0 

1 

6 

0 

2 

0 

0 

2 

0 

0 

9 

6 

0 

2 

6 

0 

3 

6 

0 

a 

6 

0 

4 

6 

0 

4 

6 

0 

5 

0 

0 

5 

0 

0 

6 

0 

0 

0 

0 

0 

8 

6 

0 

8 

6 

0 

12 

6 

0 

12 

6 

0 

15 

0 

0 

15 

0 

1 

5 

0 

1 

5 

0 

1 

10 

0 

Foreign  Bills  drawn  in  sets  :  — 

Not  exceeding  £100 

Exceeding  £  100  not  exceeding  200 

200  500 

500  1000 

1000  2000 

2000  3000 

3000  "  


1    6  each  bill. 

30  " 

40  " 

50  " 

76  " 

10    0  " 

15     0  « 


Foreign  bills  (those  drawn  from  foreign  parts)  are  not  required  to  bear 
an  English  stamp,  nor  indeed  any  stamp  at  all.  But  bills  dated  from  any 
place  abroad,  but  actually  drawn  in  England,  on  unstamped  paper,  are 
invalid.  No  action  can  be  sustained  to  enforce  payment,  nor  can  they  be 
proved  in  the  Court  of  Bankruptcy  against  the  estate  of  even  the  accepter. 
A  banker  should  therefore  use  caution  in  taking  bills  where  the  drawers 
and  the  accepters  are  the  same  firm,  — one  branch  of  the  house  residing 
in  England,  and  the  other  branch  residing  abroad.  Such  bills  may  be 
fabricated  in  London  for  the  purpose  of  raising  the  wind. 

If  a  woman  accepts  a  bill,  and  is  married  before  it  becomes  due,  her 
husband  may  be  sued  for  the  amount,  but  she  cannot.  If  a  bill  be  in- 
dorsed to  a  woman,  who  afterwards  marries,  her  husband  must  indorse 
the  bill,  unless  she  indorses  it  as  the  agent  and  by  the  authority  of  her 
husband.  Should  she  have  occasion  to  sue  any  of  the  antecedent  parties 
to  a  bill,  the  action  must  be  brought  in  the  name  of  the  husband,  or  else 
in  the  joint  names  of  the  husband  and  the  wife.  If  a  woman  who  is  actu- 
ally married  accept  a  bill  by  and  with  the  authority  of  her  husband,  the 
acceptance  is  binding  on  the  husband ;  but  if  she  accept  a  bill  without 

33 


A  Treatise  on  Banking. 

his  authority,  he  cannot  be  legally  compelled  to  pay  it,  unless  it  were 
given  for  article*  ncceMary  to  her  support 

A  person  under  twenty -one  yean  of  age,  whether  accepter,  drawer,  or 
indorser  of  a  bill  of  exchange,  cannot  be  sued  at  law,  except  the  bill  be 
drawn  upon  him  for  necessaries ;  but  if  he  draw  a  bill  and  transfer  it  to  a 
third  person,  the  third  party  may  sue  the  accepter.  The  term  "  m-ces- 
•vies  is  generally  considered  to  include,  not  only  those  things  which  are 
essential  to  existence,  but  those  also  which  are  suitable  to  the  rank  of  the 
party.  Many  articles  are  considered  necessary  to  the  son  of  a  nobleman, 
which  would  not  be  necessary  to  a  man  of  an  inferior  station  in  society. 

If  the  drawee  refuse  to  accept  a  bill,  the  holder  may  immediately  bring 
an  action  for  the  amount  against  all  the  other  parties,  without  waiting  un- 
til the  bill  becomes  due.  And  should  the  word  "at"  be  written  before 
the  name  of  the  drawee,  it  makes  no  difference,  especially  if  it  be  written 
in  such  a  manner  as  if  designed  to  escape  observation.  But  it  is  the  prac- 
tice of  the  London  bankers  to  hold  bills  refused  acceptance,  and  merely 
give  notice  of  the  circumstance  to  the  party  who  sent  it  to  the  bank.  If, 
however,  it  be  an  inland  bill,  drawn  after  sight,  the  bill  is  noted  for  non- 
acceptance.  If  it  be  a  foreign  bill,  it  is  protested,  and  the  protest  sent  to 
the  last  indorser.  If  the  bill  be  not  paid  when  due,  it  is  then  protested  for 
non-payment,  and,  with  the  second  protest,  returned  to  the  last  indorser. 
When  a  bill  is  drawn  after  sight,  the  day  on  which  it  is  noted  or  protest- 
ed for  non-acceptance,  is  regarded  as  the  day  on  which  the  drawee  has 
seen  it,  and  the  time  on  which  it  will  become  due  is  calculated  accord- 
ingly. 

If  the  accepter,  drawer,  and  all  the  indorsers  to  a  bill  become  bank- 
rupts, the  holder  may  prove  for  the  full  amount  under  each  commission, 
and  receive  a  dividend  under  each,  provided  he  do  not  receive  altogether 
more  than  20*.  in  the  pound.  But  if  he  receive  a  dividend  under  one 
commission  before  proving  under  the  others,  he  can  only  prove  for  the 
balance. 

If  a  bill  be  lost,  immediate  notice  should  be  given  to  the  accepter,  and 
to  the  bankers  or  other  parties  at  whose  house  it  may  be  made  payable. 
If,  after  such  notice,  they  pay  the  bill  to  any  person  who  had  not  given  value 
for  it,  they  are  accountable  to  the  loser.  But  a  person  who  had  given 
value  for  a  lost  or  stolen  bill  to  a  thief  or  to  a  finder,  con  recover  the 
amount  from  all  the  parties  in  the  same  way  as  though  he  had  received  it, 
in  the  course  of  business,  from  the  lost  indorser,  provided  the  bill  was  not 
specially  indorsed.  But  if  it  was  specially  indorsed,  and  the  thief  or  find- 
er should  have  forged  the  indorsement,  the  holder  cannot  recover  the 
amount,  even  though  he  may  have  given  value  for  the  bill,  but  he  must 
sustain  the  loss. 

If  a  lost  bill  should  have  been  specially  indorsed,  or  if  the  loser  can 
prove  that  the  bill  has  been  destroyed,  he  can  bring  an  action  against  the 
accepter  for  the  amount.  But  if  he  cannot  prove  that  the  bill  is  actually 
destroyed,  and  it  was  indorsed  in  blank,  he  cannot  recover  from  the  ac- 
cepter. For  it  is  possible  that  a  finder  may  pass  it  for  a  valuable  con- 
sideration to  another  party,  who  would  thus  be  a  bonafde  holder,  and 
might  compel  the  accepter  to  pay  him  the  amount  In  this  case,  there- 

34 


Bills  of  Exchange. 

fore,  the  loser  has  no  redress  in  law,  but  he  may  apply  to  a  court  of 
equity,  and  might  obtain  an  order  upon  the  accepter  to  pay  the  amount  of 
the  lost  bill  upon  receiving  a  satisfactory  indemnity.  The  loser  of  a  bill 
should  cause  payment  to  be  demanded  from  the  accepter  the  day  it  falls 
due,  and  give  notice  of  dishonor  to  the  drawer  and  indorsers,  in  the  same 
way  as  though  he  had  the  bill  in  his  possession. 

A  country  banker  gave  change  for  a  Bank  of  England  note  for  £  100 
which  had  been  stolen.  It  was  done  at  the  time  of  the  races,  and  im- 
mediately on  opening  the  bank.  The  party  who  brought  it  stated  he 
had  some  bets  to  pay  at  the  race-course,  and  gave  a  fictitious  address, 
which  was  written  on  the  note.  The  loser  of  the  note  brought  an  action 
against  the  banker,  and  recovered  the  amount.  The  judge  who  tried  the 
cause,  stated  that,  in  his  opinion,  there  had  been  laches,  i.  e.  neglect  on 
the  part  of  the  bankers  in  not  making  further  inquiry,  and  under  his  di 
rection  the  jury  returned  a  verdict  for  the  plaintiff. 

Any  material  alteration  of  a  bill  of  exchange  vitiates  the  bill,  and  it 
cannot  be  legally  enforced  against  any  of  the  parties,  unless  the  alteration 
be  made  before  the  bill  be  accepted,  and  also  before  it  has  passed  out  of 
the  hands  of  the  drawer. 

Thus,  if  a  bill  be  left  for  acceptance  by  the  drawer,  and  the  drawee 
alter  the  date,  time,  or  amount  of  the  bill,  and  then  accept  it,  the  altera- 
tion does  not  affect  the  validity  of  the  bill ;  but  if  the  bill  be  left  for  accept- 
ance by  a  third  party,  and  the  drawee  then  alters  and  accepts  the  bill,  the 
bill  is  vitiated.  Any  alteration  in  the  date,  sum,  time,  name  of  drawer  or 
payee,  or  appointing  a  new  place  of  payment,  is  a  material  alteration,  and 
requires  a  new  stamp.  But  any  alteration  made  only  with  a  view  of  cor- 
recting a  mistake  does  not  vitiate  a  bill,  provided  it  be  made  with  the  con- 
currence of  all  the  parties.  If  a  drawee  accepts  a  bill,  and  before  he 
gives  the  bill  out  of  his  possession  cancels  his  acceptance,  he  cannot  be 
compelled  to  pay  it. 

A  bill  must  be  presented  in  reasonable  time.  But  what  is  a  reasonable 
lime  is  a  question  of  consideration  for  the  jury,  and  the  decision  has  varied 
according  to  circumstances.  If  a  bill  be  presented  at  a  banker's  after  the 
hour  of  business,  the  presentment  is  not  in  reasonable  time  ;  nevertheless 
such  a  presentment  is  a  legal  presentment,  if  the  banker  or  any  per- 
son on  his  behalf  should  be  there  to  give  an  answer  to  the  party  pre- 
senting it. 

Cheques,  and  notes  payable  on  demand,  should  also  be  presented  for 
payment  within  a  reasonable  time  after  they  are  received.  It  has  been 
held  that  a  person  who  receives  a  cheque  is  not  bound  to  present  it  at  the 
banker's  till  the  next  morning ;  and  if  the  bank  was  at  a  distance  he  was 
not  bound  to  put  the  cheque  into  the  post-office  until  the  next  day.  But, 
perhaps,  it  would  not  be  safe  to  rely  upon  these  decisions.  No  general 
rule  can  be  given ;  for  the  time  which  may  be  reasonable  in  one  case 
may  be  unreasonable  in  another. 

If  a  banker  receive  a  bill  or  note  by  post,  he  is  not  required  to  present 
it  until  the  next  day. 

"  A  man  taking  a  bill  or  note  payable  on  demand,  or  a  cheque,  is  not  bound,  laying 
aside  all  other  business,  to  present  or  transmit  it  for  payment  the  very  first  opportu- 

35 


A  Treatise  on  Banking. 

nitr.  It  hu  long  sine*  bam  decided,  in  numcroiu  CAMS,  that,  though  the  party  hj 
whom  the  hill  or  note  is  to  IT  |>ui<l  lixc  in  the  name  place,  it  i>  imt  n«»Mirv  t<>  present 
the  instrument  for  payment  till  the  morning  next  after  the  day  on  which  it  was  re- 
cdred.  And  later  cm*ea  bare  e*t«l«IMic,l.  tlmi  the  holder  of  A  dkWM  hiw  tin-  whole 
of  the  hanking  hours  of  the  next  day  within  which  to  present  it  for  payment" 
(Byfes's  Lav  *f  WU  of  Esdwye,  p.  183.) 

In  ihe  following  case  it  was  deci«If<l  that  the  presentment  of  a  bill  of 
exchange  at  the  clearing-house  is  a  legal  presentment. 

u  On  the  1 1th  of  September,  between  one  and  two  o'clock,  the  defendant*  gave  the 
plaintilfs  a  cheque  upon  Bloxam  &  Co.,  then  hankers,  in  pa\  im-m  for  p«x|,  '1  he 
plaintit!-  !n.l_-eil  (he  cneqne  with  Messrs.  Harrison,  their  hankers,  n  few  minute- 
four;  and  they  presented  it  between  fire  and  six  to  Bloxam  &  Co.,  who  marked  it  as 
good.  It  was  proved  to  be  the  usage  among  Ix>ndon  bankers  not  to  pay  any  cheque 
presented  by  or  on  behalf  of  another  banker  after  four  o'cloek,  hut  merely  t»  mark  it  if 
good,  and  pay  it  next  day  at  the  clearing-house.  On  the  rjth.at  noon.  Ilnrri.-on-'  clerk 
took  tin-  cheque  to  the  clearing-house,  hut  no  person  attended  for  Bloxam  &  Co.,  who 
stopped  payment  at  nine  on  that  morning,  and  the  cheque  was  therefore  treated  as 
dishonored.  The  plaintiffs,  in  going  with  the  cheque  to  Harrisons',  passed  Bloxams' 
house.  On  a  case  stating  these  facts,  the  court  held  that  there  had  Men  n«  ladies  in 
the  plaintiffs  in  not  presenting  the  cheque  to  Bloxam  &  Co.  on  the  1 1th  for  payment, 
or  in  his  hankers  in  not  presenting  it  at  the  banking-house,  but  merely  at  the  clearing- 
house,  and  therefore  gare  judgment  for  the  plaintiff."  (Baylcy  On  Biilt  «/ 


Bills  may  be  negotiated  after  they  are  due,  but  the  party  receiving  an 
over-due  bill  cannot  acquire  a  claim  which  the  party  holding  the  bill  did 
not  possess.  For  instance,  one  party  may  draw  an  accommodation  bill 
upon  another.  As  in  this  case  no  value  had  been  given,  the  drawer 
could  not  sue  the  accepter  for  the  amount.  But  if  the  drawer  had  passed 
this  bill /or  value  to  a  third  party  before  it  became  due,  that  party  could 
sue  the  accepter.  But  if  the  drawer  passed  it  to  a  third  party  even  for 
value  after  it  became  due,  the  third  party  could  not  sue  the  accepter,  but 
would  stand  in  the  same  situation  as  the  drawer. 

If  a  party  lodged  bills  with  a  banker  for  the  purpose  of  being  collected, 
and  the  amount  when  received  to  be  placed  to  his  credit,  and  the  banker 
gets  them  discounted,  and  applies  the  money  to  his  own  use,  the  customer 
has  no  redress  except  against  the  banker.  The  party  who  has  given  value 
for  the  bills  to  the  banker  can  enforce  payment  of  them. 

As  the  giving  notice  of  the  dishonor  of  a  bill  or  cheque  is  of  consider- 
able practical  importance,  I  shall  make  a  few  extracts  upon  the  subject 
from  Mr.  Justice  Bayley's  Treatise  on  Bills  of  Exchange. 

"  Though  no  prescribed  form  be  necessary  for  notice  of  the  dishonor  of  a  bill  or 
note,  it  ought  to  import  that  the  person  to  whom  it  is  given  is  considered  liuhlc,  und 
that  payment  from  him  is  expected. 

"  And  the  notice  ought  to  import  that  the  bill  or  note  has  been  dishonored.  A 
mere  demand  of  payment  and  threat  of  law  proceedings,  in  case  of  non-payment,  is 
not  sufficient. 

i  •  j»«'cially  if  such  demand  be  made  on  the  day  the  bill  or  note  becomes  due. 

"Notice  must  be  gircn  of  a  failure  in  the  attempt  to  procure  an  acceptance,  though 
the  application  fur  such  acceptance  might  have  been  unnecessary;  otherwise  the  per- 
son guilty  of  the  neglect  may  lose  his  remedy  upon  the  hill. 

••  The  'notice  mast  come  from  the  holder,  or  from  some  party  entitled  to  call  for 
payment  or  reimbursement. 

u  A  notice  from  the  holder  or  any  other  party  will  enure  to  the  benefit  of  every 
other  party  who  stands  between  the  person  giving  the  notice  and  the  person  to  whom 


Bills  of  Exchange. 

it  is  given.    Therefore  a  notice  from  the  last  indorsee  to  the  drawer  will  operate  as  a 
notice  from  each  indorsee. 

"  It  is,  nevertheless,  prudent  in  each  party  who  receives  a  notice,  to  give  immediate 
notice  to  those  parties  against  whom  he  may  have  right  to  claim ;  for  the  holder  may 
have  omitted  notice  to  some  of  them,  and  that  will  be  no  protection ;  or  there  may  be 
difficulties  in  proving  such  notice. 

<:  A  notice  the  day  the  bill  or  note  becomes  due  is  not  too  soon ;  for  though  payment 
may  still  be  made  within  the  day,  non-payment  on  presentment  is  a  dishonor. 

"  To  such  of  the  parties  as  reside  in  the  place  where  the  presentment  was  made,  the 
notice  must  be  given,  at  the  farthest,  by  the  expiration  of  the  day  following  the  refusal : 
to  those  who  reside  elsewhere,  by  the  post  of  that  or  the  next  post  day.  Each  partv 
has  a  day  for  giving  notice,  and  he  is  entitled  to  the  whole  day;  at  least,  eight  or  nine 
o'clock  at  night  is  not  too  late.  He  will  be  entitled  to  the  whole  day,  though  the  post 
by  which  he  is  to  send  it  goes  out  within  the  day. 

"  And  though  there  be  no  post  the  succeeding  day  for  the  place  to  which  he  is  to 
send ;  therefore,  where  the  notice  is  to  be  sent  by  the  post,  it  will  be  sufficient  if  it  l>c 
sent  by  the  post  of  the  following  day ;  or,  if  there  be  no  post  the  following  day,  the 
day  after. 

"  Where  a  party  receives  notice  on  a  Sunday,  he  is  in  the  same  situation  as  if  it  did 
not  reach  him  till  the  Monday ;  he  is  not  bound  to  pay  it  any  attention  till  the  Mon- 
day, and  has  the  whole  of  Monday  for  the  purpose.  So,  if  the  day  on  which  notice 
ought  thus  to  be  given  be  a  day  of  public  rest,  as  Christmas-day  or  Good  Friday,  or 
any  day  appointed  by  proclamation  for  a  solemn  fast  or  thanksgiving,  the  notice  need 
not  be  given  until  the  following  day. 

"  And  it  has  been  held  that  where  a  man  is  of  a  religion  which  gives  to  any  other 
day  of  the  week  the  sanctity  of  Sunday,  as  in  the  case  of  the  Jews,  he  is  entitled  to 
the  same  indulgence  as  on  that  day. 

"  Where  Christmas-day,  or  such  day  of  fast  or  thanksgiving,  shall  be  on  a  Monday, 
notice  of  the  dishonor  of  bills  or  notes  due  or  payable  the  Saturday  preceding  need  not 
be  given  until  the  Tuesday  following. 

"  And  Good  Friday,  Christmas-day,  and  any  day  of  fast  or  thanksgiving,  shall,  from 
10th  April,  1827,  as  far  as  regards  bills  or  notes,  be  treated  and  considered  as  Sunday. 

"  But  these  provisions  do  not  apply  to  Scotland. 

"  If  the  holder  of  a  bill  or  note  place  it  in  the  hands  of  his  banker,  the  banker  is  only 
bound  to  give  notice  of  its  dishonor  to  his  customer,  in  like  manner  as  if  the  banker 
were  himself  the  holder,  and  his  cnstomer  were  the  party  next  entitled  fo  notice. 

"  And  the  customer  has  the  like  time  to  communicate  such  notice,  as  if  he  had  re- 
ceived it  from  a  holder. 

"  And  therefore  by  thus  placing  a  bill  or  note  in  a  banker's  hands,  the  number  of 
persons  from  whom  notice  must  pass  is  increased  by  one. 

"  Thus  notice  sent  by  a  London  banker  to  a  London  customer  the  day  after  the  dis- 
honor is  in  time ;  and  if  the  customer  communicate  that  notice  the  day  following,  that 
will  be  in  time  also. 

"  It  is  no  excuse  for  not  giving  notice  the  next  day  after  a  party  receives  one,  that 
he  received  his  notice  earlier  than  the  preceding  parties  were  bound  to  give  it,  and  th:it 
he  gave  notice  within  what  would  have  been  proper  time  if  each  preceding  party  had 
taken  all  the  time  the  law  allowed  him.  The  time  is  to  be  calculated  according  to  the 
period  when  the  party  in  fact  received  his  notice.  Nor  is  it  any  excuse  that  there  arc 
several  intervening  parties  between  him  who  gives  the  notice,  and  defendant  to  whom 
it  is  given  ;  and  that  if  the  notice  had  been  communicated  through  these  intervening 
parties,  and  each  had  taken  the  time  the  law  allows,  the  defendant  would  not  have 
had  the  notice  sooner. 

"  Sending  a  verbal  notice  to  a  merchant's  counting-house  in  the  ordinary  hours  of 
business,  at  a  time  when  he  or  some  of  his  people  might  reasonably  be  expected  to  be; 
there,  is  sufficient ;  it  is  not  necessary  to  leave  or  to  send  a  written  notice,  or  to  send 
to  the  house  where  he  lives.  Sending  notice  by  the  post  is  sufficient,  though  it  be  not 
received ;  and  where  there  is  no  post,  it  is  sufficient  to  send  by  the  ordinary  mode  of 
conveyance. 

"  And  it  is  not  essential  the  notice  should  be  sent  by  the  post  where  there  is  one ; 
sending  to  an  agent  by  a  private  conveyance,  that  he  may  give  the  notice,  is  sufficient, 
if  the  agent  give  the  notice,  or  take  due  steps  for  the  purpose,  without  delay. 

"  Notice  to  one  of  several  partners  is  notice  to  all :  and  when  a  bill  lias  been  drawn 
D  37 


A  Treatise  on  Banking. 

•poo  one  of  the  partners,  and  by  nim  arrvpted  and  dishonored,  it  i«  on- 
/  to  give  notice  of  *urh  dUhonor  to  the  turn  .  tor  tin-,  must  necessarily  be 
known  to  one  of  them,  and  the  knowledge  of  one  is  the  knowledge  of  all. 

"Upon  an  acceptance  parable  at  a  banker*,  n.>n.  .•  <>i  n,.n  j..i\  im  m  n<-«-«l  nut  !•«• 
givm  to  the  accepter ;  for  be  makes  the  banker*  hi*  agenu ;  presentment  to  them  i» 
presentment  to  him 

"  A  penon  who  ha*  been  once  discharged  by  laches  from  his  liability  on  a  bill  or 
note  i«  always  discharged.  And,  therefore,  where  two  or  more  parties  to  a  bill  or 
note  bare  been  so  discharged,  but  one  of  them,  not  knowing  of  the  laches,  payi  it ;  h<- 
l«r*  it  in  his  own  wrong,  and  cannot  recover  the  money  from  another  of  such 


As  many  bills  drawn  in  fon-ign  Inngungcs  pass  through  the  hands  of  a 
l..ni'lon  banker,  it  may  be  useful  to  give  a  list  of  some  of  those  words 
v.  Inch  express  the  amount  and  the  time,  the  two  main  points  in  a  bill 
of  exchange  :  — 

A>X>'*A,    . 
frVmoa, 
l>utch,       . 

Fr~*,. 


I  hitch, 
/VencA, 


<  >m- 

Two          Three       Sixty 

Ninety. 

Kin 

y.w,-i         Dr.-i          Sechzig 

Neunsig. 

Km 

Twee        Drie          Zcstig 

Nc-.'ini-. 

Un 

Deux         Trois         Soixante 

{  (*sSf**'  or 

Uno 

Due          Tre           Sessanta 

Nonanta,  or  Noranta. 

Uno 

Dos           Trrs          Sesenta 

Noventa. 

Hum 

Dons         Trcs          Secenta 

Noventa. 

Twa          Tre           S.xti 

Nitti. 

l\n 

To            Tre           Tredsindstyre     Halvfemtcsindstyre. 

,         , 

Two  months  after  date. 

Three  days  after  night. 

. 

Zwei  monate  nach  dato. 

Dn-i  tape  nach  sirht. 

• 

Twee  maanden  na  dato. 
A  deax  mois  de  date. 

Drie  dagen  na  zigt. 
A  trois  jours  de  rue. 

.       .       .Ad..»Midop.d«.. 

*-*  •  •  - 


Partvmtete,    .        .        .A  dotis  mczes  de  data.  A  tres  dias  vista. 

Swedish,    .        .        .      Twa  manander  ifran  dato.  Tre  dagar  eftcr  sigt. 

.        .        .To  maaneder  efter  dato.  Tre  dage  efter  si^t. 


In  all  the  above  languages,  "  at  sight  "  is  usually  expressed  by  a 
except  the  French,  which  expresses  it  by  d  rue.  "  At  usance  "  is  ex- 
pressed by  a  uso  or  ad  uso.  The  names  of  the  months  so  nearly  re- 
semble the  English,  that  a  mistake  can  but  rarely  occur. 

The  following  are  forms  of  bills  in  each  of  the  above  languages  :  — 

FREVCU. 

IMlr,  fc  28  SeptenAre,  1848.  Bon  pour  £  1  58  9  flbriEaffc 

Au  ringt-cinq  I>ecrmbre  prochain,  H  noia  pleura  payer  par  ce  marulat  d  fordre  de  nout- 
m(me*  la  tomme  de  amt  cinauanle-huit  livrtt  tterlings  9  ttu-Uitiys  valeur  m  notu-mima  et 
q*e  paurra  sun-ant  tavu  de 
A 


d  Ltmdra. 

Qnvur. 

,  den  28  October,  1  M8.  Pro  £  100  Sterling. 

Zvti  monaU  nock  dato  zahlat  SSe  gryen  dir»en  Prima  Wtcfmrl  an  die  Ordre  de»  flerrn 
__  Em  Hundart  Pfund  Sterling  dm  Werih  erhalten.     Sit  bringm 
told*  a»f  Redtnung  lout  Dericht  mm 

Oerren  _ 


38 


Bills  of  Excluinge. 

DOTCH. 

Grouw,  den  1st.  November,  1848.  FOOT  £59  17     6 

Tioee  maanden  na  data  gelieve  UEd  te  betalen  voor  dezen  omen  prima  Wisselbrief  de  se- 
cunda  niet  betaald  zynde  acm  de  ordre  van  de  Heeren  _  L  negen  fr 
KHft>9  Ponden  zeventien  schdling  en  zespences  sterling,  de  waarde  in  rekening  UEd  stelle  het 
op  rekening  met  of  zander  advys  van 

de  Heer  __  _ 
te  London. 

ITALIAN. 

Livorno,  le  25  Settcmbre,  1848.  Per  £500  Sterline. 

A  Tre  mesi  data  pagate  per  questa  prima  de  Cambio  (una  sol  volta)  aW  ordine 
_  .,  la  somma  di  Lire  cinque  cento  slerline  valuta  cambiata,  e  ponete 
in  conto  M.  S.  secondo  fawiso  Addio 


Londra. 

SPANISH. 

Malaga,  dZOde  Setb"  de  1848.  Son  £300. 

A  noventa  diasfecha  se  serviran  V*  mandar  pagar  por  esta  primera  de  cambio  d  la  orden 

de  los  Sr"  _  ___  __  Tres  cientas  libras  Esterlinas  en  oro  o  plata  valor  red- 

bido  de  dhos  Sra  que  anotaran  valor  en  cuenta  segun  aviso  de 

A  los  &*  _  _ 
Londres. 

PORTUGUESE. 

£  600  Esterlinas.  Lisbon,  aos  8  de  Dezembro  de  1848. 

A  Sessenta  dias  de  vista  precizos  pagara  V  _  por  esta  nossa  unica 
via  de  Letra  Segura,  a  nos  ou  a  nossa  Ordem  a  quantia  acima  de  Seis  Centas  Livras  Es- 
terlinas valor  de  nos  recebido  em  Fazendas,  que  passera  em  Comta  segundo  o  aviso  de 


AoSenr 

Londres. 

SWEDISH. 

Bjorneberg,  den  23  September,  1848.  For  £  Sterl.  100. 

Nittio  Dagar  efter  date  behagade  H.  H.  emot  denna  prima  Wexel  (secundo  obetald)  betala 

till  Herr eUe  ordres  Etthundra  Fund  Sterling  torn  stalles  i  rakning 

enligt  avis. 

Herrar 

London. 

DANISH. 

Kjobenhavn,  9  December,  1848.  Rbae  4,000. 

Tre  maaneder  efter  dato  behager  de  at  betale  denne  Prima  Vexd,  secunda  ikke,  til  Herr 

eller  ordre  med  Fire  Tusinde  Rigsbank  Daler,  Valutta  modtaget 

og  stilles  i  Regning  ifSlge  adois.  

Herrer 


London. 

Bills  of  exchange  form  a  large  proportion  of  the  circulating  medium  of 
Lancashire,  and  supply  the  place  of  country  notes.  The  following  ac- 
count is  given  by  J.  Gladstone,  Esq.,  M .  P. :  —  * 

"  We  sell  oar  goods,  not  for  payments  in  cash,  such  as  are  usual  in  other  places,  but 
generally  at  credits  from  ten  days  to  three  months,  to  be  then  paid  for  in  bills  on  Lon- 
don at  two  or  three  months'  date.  Those  bills  we  pay  to  our  bankers,  and  receive 
from  them  bills  or  cash,  when  we  have  occasion  for  either,  to  make  our  payment*. 
The  bank-notes  or  gold  we  require  for  our  ordinary  purposes  and  charges  of  merchan- 
dise of  every  description.  The  account  is  kept  floating.  The  interest  on  both  sides  is 
calculated  At  the  same  rate,  at  present  five  per  cent.  Last  year  the  rate  was  reduced  ro 
four  •  and  the  banker  charges  a  commission  of  a  quarter  per  cent,  on  the  amount  of 

39 


A  Treatise  on  Banking. 

OM  rid*  of  the  account.  That  rharg«  U  his  mniinrrntion,  and  that  of  hu  hankers  in 
Lo»Jos\  tat  paring  <wr  acceptance  there,  both  inland  uml  foreign.  The  acroant  tlm 

f.i.it,  -    .!.  ;••  !•.  :  :  .:    ,  ••>    \':.<-    ..•:,:•,  i,  n    ,•    ;)  .•    !,,i,k,  I    m.n    l,.nr    m    his   ,  •ii-tom.  r*  ;    il'llmt 

COMMestte  ia  entire,  the  rtutomer  U  occasionally  in  his  banker'*  debt,  but  more  fre- 
i(ucntlv  the  balance  U  in  his  favor. 

'•"•os  that  extend  to  the  whole  of  Lancashire  ?  —  I  believe  the  syntcm  at  Munches- 
Mr, Preston,  and  the  other  print -i|.al  t->«  us  is  .»imi!nr:  I  urn  not  u'wan-  i.f  HIIV  other. 
Then  are  tome  small  country  l-miki-i-  in  tin-  in  i<;lilw>iirhood  of  Manchester  «lu,  i-uc 
promissory  notes,  but  I  do  not  know  any  tiling  of  tln-ir  prm-tici-  ;  none  of  t|:.-  nn.i.  i,-- 
apectable  banks  in  Lancashire  do  issue  r  >nls,  216,  Glml>t. 

•  If  I  sell  a  thousand  pounds'  worth  of  goods  to  a  whole*alc  ;;ro,  ,-r,  or  any  other  \#T- 

soo  who  again  distributes  them  to  hi-  customers  in  tin  i •mintry.  win n  In ncs  to  |,ny 

me  the  £  1.000  he  will  do  so  in  bill*,  ninnin-  from  £  10  to  any  other  MIIII  ;  tin-  .1.  1  '•••  <> 
may  be  paid  in  twenty  or  thirty  lulls  of  i-xi-lmn-r,  lirnwn  on  London,  uml  guncrnlly  at 
two  and  sometimes  three  months'  date."  (Lords,  227,  Gladstone.) 

Mr.  Lewis  Loyd,  of  the  firm  of  Messrs.  Jones,  Loyd,  &  Co.,  estimated, 
in  1826,  that  the  circulation  of  Manchester  consists  of  nine  parts  bills  of 
exchange,  and  the  tenth  part  gold  and  Bank  of  England  notes.  Others 
think  the  proportion  is  as  high  as  twenty  to  one,  or  even  fifty  to  one. 
(See  Evidence  of  Lewis  Loyd,  Esq.,  and  of  Mr.  Henry  Burgess,  before 
the  Committee  of  the  House  of  Lords,  pp.  294,  298.)  Mr.  Loyd  sfau-d 
he  had  seen  bills  of  £  10  with  a  hundred  and  twenty  inilmx DM nis 
upon  them;  and  when  the  stamp  duties  were  lower,  bills  wen-  drawn  of 
a  less  amount  He  gives  the  following  criteria  of  accommodation  bills : 
—  "  Bills  that  are  issued  for  speculation  generally  travel  to  London  very 
rapidly,  with  very  few  indorsements  upon  them ;  they  ore  wanted  to  be 
converted  into  bank-notes  immediately,  and  come  quite  clean,  and  with- 
out any  marks  of  negotiation  upon  them ;  and,  besides  that,  we  know  the 
parties  upon  them  pretty  well,"  In  Scotland  on  accommodation  bill  is 
called  a  wind  bill. 

It  may  be  mentioned,  that  after  the  establishment  of  branches  of  the 
Bank  of  England  at  Manchester  and  Liverpool,  the  bill  circulation  of 
Lancashire  was  considerably  diminished.  Most  of  the  banks  made  agree- 
ments with  the  branch  bank,  stipulating  that  in  consideration  of  having  a 
certain  amount  of  discount,  at  a  reduced  rate  of  interest,  they  would  not 
kMue  for  local  circulation  any  bills  they  had  discounted  for  their  custom- 
ers. These  agreements  have  been  modified  since  the  act  of  1844 ;  but 
still  the  main  circulation  of  Lancashire  consists  of  Rink  of  England 
notes.  It  would  not  now  be  possible  to  find  a  bill  with  a  hundred  and 
twenty  indorsements. 

The  late  Mr.  Leatham  attempted  to  calculate  the  amount  of  bills  in  cir- 
culation, or,  more  properly  speaking,  in  existence,  during  each  y«ar. 
He,  through  Lord  Morpeth,  obtained  %  return  of  tin:  number  of  stamps 
issued  from  1835  to  1KJ9  inclusive,  and  based  his  calculations  on  the  sup- 
position that  each  bill  was  circulated  for  half  the  amount  \\hirh  the  stamps 
would  cover,  which  was  considerably  under  the  amount.  From  the  ex- 
perience of  his  own  bank,  compared  with  that  of  the  principal  discount 
offices  in  London,  he  found  that  the  overage  date  of  bills,  including  for- 
eign and  inland,  was  three  months.  He  then  took  the  whole  stamps  for 
a  year  and  divided  them  by  four,  which  gave  the  amount  circulating  at 
onetime.  By  a  similar  induction,  he  estimated  foreign  hills  at  one  sixth 
of  the  English,  though  the  proportion  was  rather  greater ;  and  he  took  the 

40 


Surplus  Funds. 

same  average  for  Irish  bills  in  the  years  where  no  official  returns  had 
been  made.     Mr.  Leatham's  statement  is  as  follows  :  — 

Bill  Circulation  of  Great  Britain  and  Ireland,  during  the  years  undermentioned. 

1815.  1821.  1825.  18526-27. 

£  £  £  £ 

Bill  Stamps  for  Great  Britain,  creating  the  sum,          477,493,100   232,429,800    260,379,400    207,347,400 

Estimated  Irish  Bills, 79,582,183     38,738,300     43,396,566     34,557,803 

Foreign  Bills, 92,845,880     45,194,683      50,629,327     40,317^072 

Total,        .  '     .        .        .        .  649,921,163  316,362,783  354,405,293  282,222,300 

Average  circulation, 162,480,290  79,090,695  88,601,323  70,555,576 

The  following  is  a  similar  return  for  the  years  1835  to  1839. 

1835.  1836.  1837.  1838.  1839. 

£  £  £  £  £ 

British  Bills, 294,775,269  355,288,900  333,263,600  341,947,400  391,203,000 

Irish  Bills, 51,109,061  59,155,607  54,179,165  54,359,464  55,615,722 

Estimated  amount  of  Foreign  Bills,         57,914,721  69,420,406  65,012,080  66,500,577  75,479,120 
Bills  created  by  bankers  compound- 
ing for  Stamps,     ....           1,604,000  2,078,560  2,624,600  2,696,600  3;196,000 

Total,        .        .  405,403,001    485,943,473    405,084,445    465,504,041    528,493,842 

Average  circulation,        .        .        .        101,350,762    121,485,868    113,771,111    116,376,010    132,123,460 

There  are  some  knotty  questions  connected  with  bills  of  exchange ; 
such  as,  Ought  bills  of  exchange  to  be  regarded  as  currency  ?  Have  bills 
of  exchange  any  effect  on  the  prices  of  commodities  ?  In  what  way  do 
bills  of  exchange  adjust  the  foreign  exchanges  ?  We  have  discussed  these 
questions  elsewhere ;  but,  as  they  more  appropriately  belong  to  the  sci- 
ence than  to  the  practice  of  banking,  we  do  not  introduce  them  into  the 
present  work. 


SECTION   VL  —  THE    ADMINISTRATION   OF   A  BANK   WITH 
REGARD  TO  THE  EMPLOYMENT  OF  ITS  SURPLUS  FUNDS. 

THE  means  of  a  London  banker  consist  mainly  of  his  capital  and  his 
deposits.  A  certain  portion  of  this  sum  is  kept  in  the  till,  to  meet  daily 
demands ;  another  portion  is  advanced  in  the  way  of  discounts  or  loans  to 
his  customers.  The  remainder  forms  his  surplus  fund ;  of  which  a  part 
will  probably  be  invested  in  government  securities ;  loans  to  bill  brokers, 
payable  on  demand  ;  in  short,  loans  on  the  stock  exchange,  or  in  firstrate 
bills  obtained  through  the  bill  brokers,  and  hence  styled  brokers'  bills.  The 
government  securities  are  the  more  permanent  of  these  investments.  The 
amount  will  seldom  vary.  It  is  not  deemed  creditable  for  a  bank  to  spec- 
ulate in  the  funds,  or  to  buy  and  sell  stock  frequently,  with  a  view  of 
making  a  profit  by  the  difference  of  price  ;  hence  a  banker  sells  his  gov- 
ernment securities  only  in  a  season  of  pressure,  as  a  means  of  precaution, 
or  in  order  to  meet  urgent  demands.  On  other  occasions,  he  will,  when 
necessary,  reduce  his  short  loans  or  brokers'  bills.  These  form  his  fluc- 
tuating investments.  In  seasons  when  money  is  abundant  his  deposits 
will  increase,  and  perchance,  at  the  same  time,  the  demand  of  his  cus- 
D*  41 


A   Treatise  on  Banking. 

tourers  for  loan*  or  discounts  will  dimini-h.  His  surplus  funds  will  thus 
increase.  But  these  temporary  surplus  funds  ho  will  on  no  account  in- 
vest in  government  securities,  as  his  deposits  will  be  certainly,  .-mil  per 
haps  suddenly,  reduced,  ami  In-  might  have  to  reali-/«  ument  se 

curities  at  a  lorn.     He  will  in  this  case  increase  his  loans  to  brokers,  and 
his  brokers'  bills.     And  though  ho  will  pot  as  much  interest  as  In-  ran,  he 
will  take  a  very  low  interest  rather  than  keep  the  money  unproductive  in 
his  till,  or  invest  it  in  a  more  permanent  form.     \\Y  will  now  take  a 
short  review  of  the  different  kinds  of  investment  we   have   meni 
The  three  grand  points  for  consideration  are,  convertihiliiy,  exemption 
from  loss,  and  a  good  rate  of  interest.     But  first  we  will  notice  tin 
cumstances  which  regulate  the  amount  of  cosh  to  be  kept  in  the  till. 

The  amount  of  money  which  a  banker  will  keep  in  his  till  depends 
upon  circumstances.  First,  the  amount  of  his  deposits.  It  is  natural  to 
suppose  that  when  his  doj>osits  are  large  he  will  keep  mure  mi.ney  to 
meet  them  than  when  his  deposits  are  small.  Secondly,  the  amount  of 
his  daily  payments.  These  will  not  at  all  times  correspond  with  the 
amount  of  the  deposits,  for  some  accounts  are  more  operatirr  than  others. 
On  commercial  accounts,  for  instance,  the  payments  will  be  much  heavier 
in  proportion  to  the  average  balance,  than  on  accounts  which  ure  not 
commercial.  The  city  bankers  pay  much  larger  sums  every  day,  in 
proportion  to  the  amount  of  their  deposits,  than  the  bankers  at  the  \\  •  • 
end.  Thirdly,  if  a  banker  issues  notes,  he  will  keep  a  less  amount  of 
other  money  in  his  till.  The  popular  opinion  is,  that  he  keeps  im 
he  has  to  provide  payment  for  his  notes  as  well  as  his  deposits.  This  is 
true  in  seasons  of  pressure.  But  in  ordinary  times  he  keeps  less,  as  he  pays 
the  cheques  drawn  on  account  of  his  deposits  with  his  notes,  ami  tin  .-«• 
notes  often  get  into  the  hands  of  another  banker,  w  ith  whom  he  settles  by  a 
draft  on  London.  His  reserve  to  meet  his  notes  is  kept,  not  in  his  own 
till,  but  in  London,  where  it  probably  yields  him  interest.  Indeed,  when 
his  deposits  are  withdrawn  in  large  amounts,  they  are  more  usually  with- 
drawn by  a  draft  on  London  than  in  any  other  way.  Fourthly,  the  num- 
ber of  the  branches.  If  a  bank  has  many  branches,  the  total  amount  of 
cash  kept  in  the  tills  of  the  head  office  and  all  the  branches  put  together, 
will  be  considerably  more  than  would  be  required  if  the  whole  of  the  bus!- 
ness  were  collected  into  one  place.  In  the  case  of  a  run,  the  ditl'eruico  is 
considerable,  as  every  point  open  to  attack  must  be  well  fortified. 
stoppage  of  one  branch,  even  for  a  short  time,  would  bring  discredit  upon 
the  whole  establishment.  Fifthly,  in  London  the  amount  of  notes  to  he 
kept  in  the  till  will  be  effected  by  the  privilege  of  clearing.  Those  hank- 
ers that  **  clear,"  can  pay  bills  and  cheques  upon  them  l>y  the  hills  and 
cheques  they  have  upon  other  bankers.  Those  hanks  that  do  not  i 
must  pay  all  the  bills  and  cheques  upon  them  in  hank-notes,  before  th«  y 
receive  payment  of  the  bills  and  cheques  they  have  upon  other  hankers. 
Hence  they  must  lock  up  every  night  with  a  larger  amount  of  cash  in  their 
vaults. 

/      We  need  hardly  say,  that  with  every  banker  the  amount  in  the  till  will 
/    fluctuate  from  day  to  day.     Though   a  banker  has  a  certain  av< 
**       amount  in  his  own  mind,  below  or  above  which  he  does  not  swerve  very 

42 


Surplus  Funds. 

widely,  yet  the  cash-book  will  seldom  be  exactly  this  amount.  Sometimes 
he  will  strengthen  his  till,  in  the  prospect  of  large  payments  that  mav 
come  upon  him  suddenly.  At  other  times  he  will  run  his  till  low  for  a 
day  or  two,  in  expectation  of  large  sums  that  will  shortly  be  due  to  him. 
During  the  day,  too,  either  the  receipts  or  the  payments  may  be  heavier 
than  he  expected,  and  hence,  now  and  then,  the  cashier  reports  to  the 
chief  clerk,  or  to  the  banker,  the  state  of  the  till,  in  order  that,  if  neces- 
sary, it  may  be  replenished.  The  temperament  of  a  banker,  too,  has 
some  effect  in  this  case.  Some  bankers  are  so  cautious  that  they  will 
"  lock  up  "  with  a  large  amount  of  cash  ;  others  are  so  anxious  to  make 
profit,  that  they  will  keep  their  cash  very  low.  The  state  of  the  monev 
market  will  also  influence  the  tills  of  the  bankers.  When  money  is  abun- 
dant, a  banker  will  lock  up  with  more  money  than  he  wants,  because  he 
cannot  employ  his  funds.  When  money  is  so  scarce  as  to  betoken  a 
pressure,  he  will  also  lock  up  strong,  so  as  to  be  prepared  for  any  emer- 
gency. In  fact,  there  can  be  no  general  rule  for  regulating  the  amount 
of  the  till.  Every  banker  must  be  guided  by  the  experience  of  his  own 
bank.  The  directors  of  the  bank  of  England  consider  that  their  reserve 
in  bank-notes  and  gold  should  be  equal  to  about  one  third  of  their  depos-  / 
its.  From  the  accounts  published  by  some  of  the  London  joint-stock 
banks,  it  would  appear  that  the  "  cash  in  hand  "  is  equal  to  about  one  ( 
fifth  or  one  sixth  of  their  liabilities.  Even  this,  we  conjecture,  is  a  higher  ) 
proportion  than  that  which  is  generally  kept  by  London  bankers,  espe- 
cially by  those  who  settle  their  accounts  with  each  other  at  the  clearing 
house. 

To  resume  :  After  a  banker  has  furnished  his  till,  and  supplied  his  cus- 
tomers with  such  loans  and  discounts  as  they  may  require,  he  has  a  sur- 
plus of  cash.  This  surplus  may  be  considered  as  being  divided  into 
two  parts,  —  though  it  is  never  actually  so  divided,  —  the  pjcrmanent  sur- 
plus, which  the  banker  is  not  likely  to  require,  except  in  seasons  of  ex- 
treme pressure,  and  the  temporary  surplus  arising  from  fluctuations  in  the 
deposits.  We  shall  now  notice  those  modes  of  investment  to  which  we 
have  referred. 

With  regard  to  government  securities,  we  have  high  authority  from  the 
testimony  of  practical  bankers.  The  following  are  quotations  given  be- 
fore the  Joint-stock  Bank  Committee,  in  the  year  1836,  by  the  late  Vin- 
cent Stuckey,  Esq.,  the  founder  of  Stuckey's  Banking  Company,  in  Som- 
ersetshire, and  James  Marshall,  Esq.,  the  retired  secretary  of  the  Provin- 
cial Bank  of  Ireland. 

Mr.  V.  Stuckey  :  — 

"  What  is  your  reason  for  keeping  so  large  a  sum  in  Government  stock  ?  —  I  have 
always  found  from  my  experience,  except  two  days  in  my  life,  that  I  could  get  money 
more  easily  upon  those  securities  than  any  other. 

"  Is  it  easier,  in  times  of  emergency,  to  obtain  money  on  government  stock  than  on 
good  mercantile  bills  ?  —  I  have  always  found  it  so. 

"  You  do  not  concur  with  any  witnesses  who  state  that  they  have  found  good  ne- 
gotiable bills  mere  easy  to  obtain  money  upon  than  government  stock? — No;  I 
have  never  found  that  with  a  good  bill ;  even  of  the  house  of  Baring,  I  could  get 
money  more  easily  than  on  government  stock. 

•'  Do  you  consider  that,  generally  speaking,  in  London  the  rate  of  interest  at  whicli 
you  borrow  money  on  exchequer  bills  and  stock  is  notoriously  lower  than  that  at 

43 


A  Trtmtuc  on  Banking. 
«•  Mfc  at  Mnk-ssfil--  Tes,  it  U  lower,  and  for  that  reason  we 


Mr. 

-  Win  yo«  Idbm  lb»  Co««m«e  whrthrr  H  S«  th«  o««e  of  the  Provincial  Bank  to 
rave*  any  portion  of  its  And*  is  the  poblk  securities!  — It  has  been  its  uniform  proc- 
ure M  to  do. 

*  By  public  m.m  MM,  wast  do  you  understand  ?  —  The  Console,  for  instance;  there 
are  various  kinds  of  government  stock ;  exchequer  bilU  and  Bank  of  England  stock 
*r*  Mttralhr  considered  M  a  pohtte  sort  of  securit v. 

'  •  you  bold  stork  in  London  only,  or  in  1  >uMin  an  well  M  in  London  1  —  In  Dub- 
lin, hat  to  a  mated  eaneut.  bscauss  it  is  not  easily  convertible  there. 

'i  what  ground  is  it  that  it  is  not  easily  convertible  in  Dublin  '  —  From  the  lim- 
ited natai*  of  the  merit et  M  compered  with  Ix>ndon ;  we  could  nui  .->  11  i-\  >  n  un  imma- 


•tun  without  towering  considerably  the  price. 

-  Have  there  not  been  at  various  times,  from  various  causes,  runs  on  the  Provincial 
Bank,  which  rendered  U  necessary  to  supply  large  amounts  of  specie  to  that  country  1 
—  There  have  repeatedly. 

"  Do  you  consider,  from  your  experience,  that  it  would  have  been  comix-tent  to  the 
hask  to  have  maintained  iu  fall  security,  with  -.••<"...  :;..:i  t»  the  directors,  it'  they  had 
not  been  BO  mend  of  very  considerable'  I'un.le.l  pr..|M-rty  in  this  country  •  —  Certainly 
not;  speaking  of  the  last  run  that  happened  especially,  1  must  say  thai  that  dir 
from  any  former  run  in  this  respect. 

"  Ton  were  conversant  with  the  management  of  the  Scotch  banks  prior  to  ronr  con- 
lion  with  the  Provincial  Bank  f  —  Yes. 

Is  it  not  the  usage  of  all  the  Scotch  banks  in  like  manner  to  maintain  a  very  .,  ,„.,.!• 
tie  portion  of  their  funds  as  invested  in  the  government  securities  ?— I  i>.  •!.%<•  the 
practice  with  all  is  generally  so,  but  I  con  speak  particularly  to  that  of  th.-  three  oldest 
banks,  — as  they  are  common lv  called,  tin-  three  .  h:;ricrcd  hanks.  The  Hunk  of  Scot- 
land  was  erected  by  act  of  Parliament,  the  K,.\  .!  Hunk  of  Scotland  and  the  Mriti-h 
Linen  Company  are  erected  by  charter,  hut  have-  he,  u  i-.  .,.•..-!, i/.  .1  in  the  same  \\ 
that  there  are  three  public  banks  in  <li-tinetion  to  any  of  the  Fubse.jiu-ntly-foniied 
banks.  lean  state,  from  personal  knowledge,  that  these  hanks  huve  had  always  a 
very  large  sum  indeed  invested  in  the  fun.l.  .1  property  of  the  kingdom. 

•*  Do  you  consider  h  would  be  a  safe  system  of  bawnsft  if  the  capital  of  the  bank 
was  altogether  invested  in  commercial  bills?  —  (Yminly  not.'' 

.  Of  the  various  kinds  of  government  stock,  consols  are  the  best,  as  there 
/  is  a  more  ready  market  for  this  kind  of  stock,  and  money  can  usually  be 
borrowed  on  them  until  the  next  account  day  ;  so  that,  if  a  banker  has  only 
a  temporary  demand  for  money,  he  may  thus  obtain  it  at  a  moderate  in- 
terest, when,  by  selling  his  stock  at  that  time,  he  might  sustain  loss.  The 
Bank  of  England  has  recourse,  sometimes,  to  this  mode  of  strengthening 
her  reserve.  Sometimes,  too,  a  banker  may  make  a  profit  by  lending  his 
consols.  At  the  monthly  settlings,  among  the  brokers,  stock  is  some- 
rimes  in  demand,  and  money  may  be  obtained  upon  consols,  until  the 
next  settling,  without  paying  any  interest ;  and  the  banker  may  employ 
the  money  in  the  mean  time.  As,  however,  the  rate  of  interest  is  usually 
low  in  such  seasons,  his  profit  will  rarely  be  great. 

It  is  not  advisable,  however,  that  all  the  stock  a  banker  holds  should 

consist  of  consols.     For  a  month  before  the  pay nt  of  the  dividends  in 

January  and  July,  this  stock  is  shut,  and  during  those  times  he  can 
neither  sell  his  stock  nor  borrow  money  upon  it.  This  may  be  inconve- 
nient, and  he  can  only  avoid  this  inconvenience  by  selling  or  lending  his 
consols,  just  before  the  shutting,  on  the  best  terms  he  can.  To  avoid 
either  of  these  alternatives,  it  is  better  he  should  divide  his  stork,  and  hold 
half  the  amount  in  consols,  and  half  in  reduced  3,  or  in  the  '1\  per  cents. 

"•  I 


Surplus  Funds. 

The  dividends  on  these  latter  stocks  are  payable  in  April  and  October,  so 
that  by  this  means  the  banker  will  always  hold  an  open  stock :  when  con- 
sols are  shut,  the  reduced  3  and  the  3£  per  cents,  are  open,  and  vice 
versa.  There  are  no  time  bargains  in  the  reduced  3  per  cents.,  or  in  the 
3|  per  cents ;  but  in  ordinary  times  money  can  be  borrowed  upon  them 
at  the  market  rate  of  interest.  In  seasons  of  pressure  these  are  not  so 
salable  as  consols.  Bank  stock,  India  stock,  and  long  annuities,  not  be- 
ing readily  convertible,  are  not  generally  good  investments  for  bankers. 

Some  bankers  avoid  all  government  stock,  and  give  a  preference  to 
exchequer  bills.  They  have  some  advantages.  As  the  government  must 
pay  the  amount  demanded  in  March  or  June,  when  they  become  due,  there 
can  be  no  loss  beyond  the  amount  of  the  premium  at  which  they  were  / 
purchased.  A  banker,  too,  can  borrow  money  upon  them  quietly  and 
secretly.  A  transfer  of  stock  is  always  known,  and,  if  for  a  large 
amount,  will,  when  money  is  scarce,  excite  notice,  and  give  the  impres- 
sion that  the  banker  is  compelled  to  realize  some  of  his  securities,  to  meet 
demands  made  upon  him  by  his  depositors.  But  a  banker  can  hand  his 
exchequer  bills  to  a  stock-broker,  who  will  bring  him  the  money,  and  the 
party  who  has  granted  the  loan  will  know  nothing  about  the  party  for  w" 
whom  it  was  required.  On  the  other  hand,  there  are  some  disadvantages.  7T^ 
Almost  every  change  in  the  market  value  of  money  affects  the  price  of 
exchequer  bills,  and  whenever  money  becomes  abundant,  the  government 
are  very  apt  to  reduce  the  rate  of  interest  much  below  that  which  can  ) 
be  obtained  from  consols.  But  a  greater  objection  is,  that,  even  in  or- 
dinary times,  they  are  hardly  salable  in  large  amounts.  There  are  not 
now  so  many  exchequer-bill  jobbers  as  formerly,  and  hence  these  bills 
are  not  so  readily  salable.  On  this  account,  the  Bank  of  England,  who 
were  formerly  large  holders  of  exchequer  bills,  have  changed  their  system, 
and  are  now  holders  of  stock.  The  city  bankers,  too,  prefer  placing 
their  money  with  the  bill-brokers,  to  investing  it  in  exchequer  bills.  But 
they  are  still  a  favorite  mode  of  investment  with  bankers  at  the  West  end. 

East  India  bonds  yield  a  higher  interest  than  exchequer  bills,  and  the 
interest  cannot  be  reduced  till  after  twelve  months'  notice  from  the  East 
India  Company.  But  they  are  by  no  means  so  salable.  Money,  how- 
ever, may  generally  be  borrowed  upon  them ;  and  the  loans  of  the  Bank 
of  England  are  always  announced  to  be  granted  on  "  exchequer  bills, 
India  bonds,  and  other  approved  securities." 

Bonds  of  corporations,  or  of  public  companies,  are  by  no  means  proper 
investments  for  a  banker,  except  to  a  very  moderate  amount,  and  when 
they  have  a  short  time  to  run.  They  may,  however,  be  taken  as  security 
for  temporary  advances  to  respectable  customers. 

Good  commercial  bills,  of  short  dates,  have  this  advantage  over  govern- 
ment stock  or  exchequer  bills,  that  a  banker  is  sure  to  receive  back  the 
same  amount  of  money  which  he  advanced.  He  can  calculate,  too,  upon 
the  time  the  money  will  be  received,  and  make  his  arrangements  accord- 
ingly. And  if,  unexpectedly,  he  should  want  the  money  sooner,  the  bills 
can,  in  ordinary  times,  be  re-discounted  in  the  money  market.  Another 
advantage  is,  that  he  is  able  to  avail  himself  of  any  advance  in  the  current 
rate  of  interest.  He  will  get  no  higher  dividend  from  his  investment  in 

45 


A   Trtati*  on  Hanking. 

•lock,  should  money  afterwards  become  ever  to  valuable. 
with  rrpnrd  to  bilk  •»  they  fall  due  h<-  will  receive  a  higher  nte  ..f 
with  the  new  bilU  he  may  take,  and  thus,  as  the  market  rato  of 
interact  advance*,  hi»  profits  will  increase. 

The  bankers  of  Lancashire  usually  keep  the  whole  of  their  reserves  in 
bill*  of  exchange.  If  they  have  a  "  good  bill  case,11  that  is,  a  large 
amount  of  good  bills  in  their  case,  they  think  themselves  prepared  :.. 
any  emergency.  Their  objection  to  government  securities  is  founded, 
first,  upon  the  low  rale  of  interest  which  they  yield  ;  and,  seeomlly,  the 
possibility  of  low,  from  fluctuations  in  price.  They  contend,  tix>,  that 
good  bilk*  of  exchange  are  more  convertible  than  even  exchequer  hills  ; 
and,  even  if  not  convertible,  the  money  comes  back  as  the  bills  fall  dm-, 
and  thus  the  reserve  is  constantly  replenished.  The  following  •  \.<!<  n.-- 
waa  given  before  the  Commit!-  «•  «n  I!. inks  of  Issue,  in  the  year  1841,  by 
Mr.  Paul  Moon  James,  the  Manager  of  the  Manchester  and  Sulford 
Bank:  — 

•  Do  yoa  mtmn  to  MV  Out  no  portion  of  the  capital  of  vour  bank  i.«  invested  in  any 
other  •ectuity  thaa  bills  of  exchange!  —  At  tin-  present  time  it  is  not.    In  the  • 

at  all  time*,  we  hare  *  larger  amount  than  the  liabilities  of  the  bank  in  -i><>d  bill*  of 
ClcJMafB  Tbej  are  coming  due  every  day,  and  are  ili!!.!..!.  ,  ,,MM.ii' 'I  a  MTV  eligi- 
ble investment  It  it  advantageous  to  a  batik  when  it  is  in  a  position  to  get  that 
I-  :  :  ':.. 

\  K>  jro«  consider  that  bill*  of  exchange  may  safely  be  relied  upon,  as  aft<»rdin_'  the 
•Man*  by  which  to  obtain  money  wh<-in-\«T  you  want  it  '  —  After  .. 
lieare,  I  consider  that  they  may  be  safely  relied  upon ;  they  ha\.-  never  I'.u 

:  >ij  you  never  know  them  to  fail?—  I  have  known  e.vhr>|iier  bill-,  to  tail,  hut  I 
hare  aerer  known  bills  of  exchange  to  fuil.  I  am  alluding  to  the  panic  of  1825.  I 
«mld  not  tell  exchequer  bills  for  several  hours  at  that  time 

Y'»u  could  discount  bills  ? — At  that  time  money  was  obtained  upon  bills  on  the 
Mine  day  on  which  I  could  not  tret  money  fur  exchequer  dills ;  and  having  paid  a  l.ijb 
premium  for  exchequer  hills,  and  met  with  i_aeat  loss,  I  have  rather  an  objr< -timi  to 

Loti  ten 

"Do  TO»  mean  to  say,  that  you  recollect  a  day  upon  which  you  could  obtain  money 
opoa  bills  of  exchange,' and  could  not  obtain  mo'ney  upon  ttobfBSt  hills  ?  —  I  do." 

Some  of  the  Scotch  hankers,  too,  seem  to  be  favorable  to  investments 
in  commercial  bills.  Mr.  Anderson,  the  general  manager  of  the  Union 
Bank  of  Scotland,  gave  the  following  evidence  before  the  Committee  on 
Banks  of  Issue,  in  1841 :  — 

"Do  TOO  consider,  in  fart,  that  the  holding  of  a  reserve  in  government  se<-nritii-i, 
fold,  sad  Baak  of  England  notes,  independently  of  the  ordinary  daily    <>)>•  rail.. 
your  bonne*.  U,  or  is  not  essential  to  the  perfect  safety  of  a  bank  ?  —  I  <!.>  not  think 
that'll  is  qwte essential  that  they  should  be  government  securities.     Available  -.-,  mi- 
list  1  sioay  think  qirite  essential ;  but  then  comes  the  question.  What  i-  available  ' 

"Are  yoo  of  opinion  that  bills  of  exchange  are  a  proper  description  of  P-  r.  •-.  :•.  )«> 
held  hxlfpeadenily  of  the  other  species  of  resen-es  that  have  been  mentioned  ?  —  I 
•faMld  tbiok  so. 

i  >«  think  that  bills  of  exchange  may  safely  be  relied  upon  at  all  times?  —  We 
hare  Mr.  Garner's  authority  for  saying  so. 

•  Is  then  ao  essential  difference  _•  exchequer  bills  and  stwk,  and 

hills  of  exchange  as  reserves?  — If  t!  ',:in-.-  are  ;..-if.-,  ;|y  well  se- 

shoald  think  DOC,  so  far  si  the  safety  of  the  bank  is  concent*  d. " 


The  authority  of  Mr.  Samuel  (Jnrney,  from  his  high  standing  in  tl« 
eity,  is  so  constantly  referred  to  upon  this  subject,  that  we  copy  his  cvi- 

46 


Surplus  Funds. 

dence.  It  was  given  before  the  Committee  on  Joint-stock  Banks,  in 
the  year  1836 ;  previous,  of  course,  to  the  passing  of  the  act  of 
1844. 

"  Would  not  the  result  from  that  opinion  be,  that  a  properly  conducted  establish- 
ment, whether  a  private  or  a  joint-stock  bank,  should  have  some  government  securities 
or  exchequer  bills  on  which  always  to  rely  as  a  resource  in  a  moment  of  such  emer- 
gency ?  —  Experience  has  shown  that  it  is  not  needful ;  bills  of  exchange  are  quite  as 
good  a  security  to  hold  in  time  of  difficulty  as  exchequer  bills  or  stock ;  in  most  re- 
spects very  much  better. 

"  Cannot  you  conceive  a  state  of  things  in  the  money  market  —  a  state  of  mercantile 
discredit,  for  instance  —  when  it  might  be  possible  to  procure  money  on  government 
securities,  when  it  could  not  be  procured  on  private  security  in  the  shape  of  bills  ?  — 
Such  difficulty  may  possibly  exist  under  very  peculiar  circumstances ;  but  I  repeat  my 
opinion,  that  bills  of  exchange  have  proved  themselves  to  be  a  better  investment  for 
bankers  than  stock  or  exchequer  bills. 

"  It  is  quite  intelligible  why,  in  ordinary  times,  bills  of  exchange  should  be  a  prefer- 
able investment  for  money,  inasmuch  as  there  is  no  risk  of  loss  by  variation  of  pre- 
mium in  the  purchase  and  resale ;  but  would  you  wish  the  committee  to  suppose  that 
in  the  case  supposed  by  the  question,  of  a  great  degree  of  mercantile  discredit  and 
doubt,  an  amount  of  exchequer  bills  would  not  be  a  more  certain  security  on  which  to 
raise  money  than  the  bills  of  private  merchants  1  —  That  is  a  difficult  question  to  an- 
swer; I  doubt  it. 

"  Supposing  a  period  of  difficulty  to  arise,  and  two  country  bankers  came  up  to 
London,  one  who  could  exhibit  government  stock  to  the  extent  of  £  25,000,  and 
£  25, 000  in  bills  of  exchange,  and  the  other  banker  exhibiting  £50,000  in  bills  of  ex- 
change only,  which  do  you  think  would  have  the  best  means  of  procuring  accommoda- 
tion in  the  London  market  to  pay  his  engagement  ?  —  My  apprehension  is,  that  they 
would  both  get  their  supplies  upon  any  particular  emergency ;  it  is  my  judgment,  that 
to  a  banker  a  good  supply  of  bills  of  exchange  of  first-rate  character  is  a  better  invest- 
ment for  his  funds,  for  which  he  is  liable  to  be  called  upon  on  demand,  than  exchequer 
bills  or  any  government  security." 

A  London  banker  never  considers  as  a  part  of  his  reserve  the  bills  he 
has  discounted  for  his  customers.  Nothing  could  damage  his  credit  more 
than  any  attempt  to  rediscount  these  bills.  During  the  war,  the  London 
bankers  had  discount  accounts  with  the  Bank  of  England ;  and  during 
the  panic  of  1825,  it  is  well  known  they  discounted  largely  with  that  es- 
tablishment. But  since  that  period  they  have  not  done  so,  and  their  in- 
dorsements are  never  seen  in  the  money  market.  The  practice  is  now 
more  general  of  lodging  money  at  call  with  the  large  money  dealers. 
And  it  is  in  this  way  that  the  London  bankers  make  provision  for  any 
sudden  demand.  It  is  rarely,  however,  that  any  large  demand  comes  so 
suddenly  as  to  occasion  any  inconvenience.  And  it  may  be  observed, 
that  such  bankers  as  are  members  of  the  Clearing-house  have  the  whole 
day  to  make  preparation,  —  one  of  the  circumstances  which  enables  them 
to  lock  up  at  night  with  a  smaller  amount  of  cash. 

In  the  morning  the  banker  looks  at  his  "  Cash-book,"  and  observes  the        ^f 
amount  with  which  he  "  locked  up  "  the  preceding  night.    He  then  looks 
at  the  "  Diary,"  which  contains  his  receipts  and  payments  for  that  day,  as 
far  as  he  is  then  advised.     He  then  opens  the  letters,  and  notices  the  re- 
mittances they  contain,  and  the  payments  he  is  instructed  to  make.     He       V 
will  learn  from  these  items  whether  he  "  wants  money,"  or  has  "  money 
to  spare."    If  he  wants  money,  he  will  "  take  in  "  any  loans  that  may  be 
falling  due  that  day,  or  he  may  "  call  in  "  any  loans  he  may  have  out  on 
demand,  or  he  may  go  further,  and  borrow  money  for  a  few  days  on 

47 


A   Trfatisr  on  Hanking. 

•tock  or  exchequer  bttls.  Should  he  have  money  to  spare,  ho  will,  ;><  r 
adventures  discount  broken' bill*,  or  lodge  money  on  demand  with  th<: 
MlUbrokrr*,  or  lend  it  for  fixed  periods  upon  stock  ur  exchequer  hills. 
There  are  some  bill-brokers  who  usually  nmko  their  rounds  i-v.-ry  morn- 
ing, first  calling  oa  the  parties  who  supply  th.-m  with  bills,  and  thru  call- 
ing on  the  bankers  who  supply  them  with  money.  Tin-  stock  brokers. 
too,  will  call  after  "the  market  is  open,"  to  inform  the  hanker  how 
"thing*  are  going "  on  the  Stock  Exchange,  what  operations  an-  taking 
place,  and  whether  money  IN  ahundant  or  scarce  "in  the  h..u-.-";  also 
what  rumors  are  afloat  that  are  likely  to  affect  the  price  of  the  funds. 
It  is  thus  that  a  banker  regulates  his  investments,  and  finds  employment 
L  for  his  surplus  funds. 

In  our  opinion,  it  is  best  for  a  hanker  not  to  adopt  exclusively  any  one 
of  the  investments  we  have  noticed,  hut  to  distribute  his  funds  among 

••:..'        \\  .     •.!<,.•    MM    :h,-i:    |.ra.-;:--,-il    hanki-rs   of  hi-_'h   sMiniin-z  ha\  e 

bean  in  favor  of  government  securities,  as  being  at  all  times  convertible. 
The  objection  on  the  part  of  others  has  been,  that  the  value  of  these  secu- 
rities very  much  fluctuates,  and  as  their  realization  will  be  required  only  in 

H  of  pressure  when  the  funds  are  low,  it  is  sure  to  be  attended  with 
On  the  other  hand,  it  may  be  stated,  with  regard  to  "  loans  on  de- 

i,w  that  the  recent  failures  of  bill-brokers  have  shown  that  the  "  de- 
may  not  always  be  readily  met  And  with  regard  to  u  brokers' 
bill*,*1  the  numerous  failures  among  houses  of  the  first  standing  have  proved 
that  great  losses  and  most  inconvenient  "  locks-up "  may  occasionally 
take  place  from  such  securities.  Without  condemning  other  modes  of  in- 
vestment, we  are  strongly  inclined  to  favor  government  securities,  though 
fully  conscious  of  the  losses  they  may  occasionally  produce.  There  is 
one  consideration  that  must  bo  taken  into  account :  a  bank  that  has 
large  surplus  funds,  if  it  makes  no  investments  in  government  securities, 
will  be  strongly  tempted  to  invest  their  funds  elsewhere  in  other  securi- 
ties that  may  not  be  so  convertible.  It  is  true  that  more  interest  may  for 
a  time  be  obtained,  but  ultimately  the  bank  may,  though  in  a  state  of  per- 
fect solvency,  be  compelled  to  stop  payment  from  being  unable  to  realize 

Hi  .:.'•'•  -''•'  i  •  1 1 '  - . 

Another  advantage  of  a  large  investment  in  government  securities 
M,  that  the  bank,  by  the  publication  of  its  balance-sheet,  has  always  the 
meant  of  showing  to  its  depositors  that  a  large  portion  of  its  deposits  is  at 
all  times  amply  secured.  The  Bank  of  England  states  the  amount  of 
their  **  government  securities  "  distinct  from  the  "  other  securities."  It 
may  so  be  that  the  "  other  securities"  are  as  good  as  the  govern  UK  i 
cunties,  and  perhaps  more  profitable,  but  the  public  do  not  know  that  to 
be  the  case;  and  were  all  the  investments  in  "other  securities,"  they 
might  not  feel  the  same  degree  of  confidence  as  to  the  prompt  repayment 
of  their  deposits.  The  same  principle  applies  to  other  banks.  And  it 
may  reasonably  be  supposed  that  between  two  banks  in  similar  circum- 
stance* as  to  other  respects,  depositors  would  rather  lodge  their  money  in 
a  bank  which  had  a  large  amount  of  government  securities,  than  in  one 
which  had  none. 

As  we  have  referred  in  this  section  to  some  of  the  operations  of  the 

48 


The  Stock  Exchange. 


Stock  Exchange,  this  may  be  a  proper  place  to  discuss  the  nature  of 
these  transactions,  so  far  at  least  as  concerns  bankers. 

The  reader  is  of  course  aware  that  the  "  Stocks,"  or  the  "  Funds,"  or 
by  whatever  other  name  they  may  be  called,  are  debts  due  from  the  na- 
tion to  those  persons  whose  names  are  entered  on  the  bank  books.  The 
man  who  holds  £  100  consols  is  a  creditor  to  the  nation  for  £  100,  for 
which  he  receives  £  3  per  annum  ;  and  the  price  of  consols  is  the  amount 
of  the  money  for  which  he  is  willing  to  transfer  this  debt  from  himself  to 
another  person.  Now,  if  this  man  knows  another  who  is  willing  to  give 
him,  say  .£90  for  this  £  100  consols,  they  can  go  to  the  bank,  and  the 
seller,  being  properly  identified,  will  transfer  this  £  100  consols  into  the 
name  of  the  person  to  whom  he  has  sold  it.  His  account  is  then  closed 
in  the  bank  books,  and  a  new  account  is  open  in  the  name  of  the  buyer  ; 
for  every  holder  of  stock  has  an  account  in  the  bank  ledger,  in  the  same 
way  as  bankers  and  merchants  open  ledger  accounts  for  their  customers. 
The  seller  of  the  stock  will  also  give  a  receipt  to  the  buyer  for  the  money 
in  the  following  form  :  — 


Consolidated  £  3  per  Cent.  Annuities 


Dividends  due 

Jan.  5th, 

July  5th, 

and  are  usually 

paid  a  few  days 

after. 


Transfer  Days 

Tuesday, 

Wednesday, 

Thursday, 

Friday. 

Holidays 
accepted. 


RECEIVED  this 
184      of 

the  sum  of 


day  of 


being  the  Consideration  for 


Interest  or  Share  in  the  Joint  Stock  of  Three  per 
Cent.  Annuities,  erected  by  an  Act  of  Parliament 
of  the  25th  Year  of  the  Reign  of  King  GEORGE 
II.,  entitled,  An  Act  for  converting  the  several  An- 
nuities therein  mentioned,  into  several  Joint  Stocks 
of  Annuities,  transferable  at  the  BANK  of  ENG- 
LAND, to  be  charged  on  the  Sinking  Fund;  and 
by  several  subsequent  Acts,  together  with  the  Pro- 
portional Annuity  at  £  3  per  Cent,  per  Annum,  at- 
tending the  same,  by  this  day 
transferred  to  the  said 


Witness 


Hand 


Witness 


JX^1  The  Proprie- 
tors, to  protect  them- 
selves from  FRAUD, 
are  recommended  to 
ACCEPT  by  them- 
selves or  their  Attor- 
nies,  all  TRANSFERS 
made  to  them. 


£    s.    d. 


But  parties  do  not  usually  treat  with  each  other  in  this  way.  A  broker 
is  employed  either  to  buy  or  to  sell,  as  the  case  may  be.  The  stock- 
brokers are  an  association  consisting  of  about  six  hundred  persons,  who 
meet  together  in  a  building  in  Capel  Court,  Bartholomew  Lane,  close  to 
the  Bank.  Each  broker  before  admission  must  find  three  securities  for 
E  49 


A  TrtatiM  on  Banking. 

4800  each,  which  sum  it  applied  to  meet  any  claim*  the  other  members 
of  the  "House**  may  hare  upon  him  during  the  first  two  yean.  The 
suretyship  then  eeeaes.  The  subscription  paid  by  ea<-h  m.  mVr  is  ten 
guineas  par  annum.  The  Home  is  gorerncd  by  a  committee  of  thirty 

Bot  although  all  the  "member*  of  the  House"  are  called  stock- 
broker* by  the  public,  yet  within  the  House  they  are  dividi-d  into  two 
classes,  brokers  and  jobbers.  A  broker,  as  the  n.-un*-  implies,  is  an  apent 
who  buys  or  tells  for  his  customers  out  of  th«-  ll.nis.-,  and  ho  charges 
thorn  a  commission  annn  thr  amount  of  the  stock.  A  stock-jobber  is  a 
Hook  merchant;  but  he  does  not  deal  with  tin-  puhlic  ;  In-  dcais  only  with 
ttv*  brokers ;  and  be  is  at  all  times  ready  cither  to  buy  or  to  sell.  The 
price  at  which  he  sells  »  1  more  than  the  price  at  which  he  buys.  If 
one  broker  has  aa  order  from  his  customer  to  buy  £  100  consols,  and 
another  broker  has  an  order  to  sell  £  100  consols,  these  two  brokers  do 
not  deal  together,  but  both  go  to  a  jobber.  One  will  sell  his  consols  to 
the  jobber,  say  at  90,  and  the  other  will  buy  his  consols  from  the  jobber  at 
90J.  Hence  the  difference  between  the  buying  and  the  selling  price  of 
consols  is  always  £,  and  thus  in  the  newspapers  the  price  is  quoted  in  this 
way,  90  to  90}. 

A  banker  is,  of  course,  one  of  the  public,  and  when  he  wants  to  buy  or 
to  sell  stock,  he  gives  instructions  to  his  broker,  and  the  process  is  as  we 
have  now  described. 

Were  there  no  jobbers,  a  broker  would  not  easily  find  at  all  times  another 
broker  who  had  occasion  to  sell  the  same  amount  of  stock  which  he  wished 
to  buy,  and  he  would  have  a  difficulty  in  buying  or  selling  small  amounts. 
But  there  is  no  difficulty  with  the  jobbers.  The  jobbers  will  not  only  buy 
and  sell  stock  on  the  same  day,  but  they  will  buy  stock  on  one  day,  and 
agree  to  sell  it  at  a  future  day,  or  vice,  versa.  These  future  days  are 
called  Che  settling  days,  being  the  days  on  which  the  members  of  the 
House  settle  their  accounts.  They  are  fixed  by  the  Committee  of  the 
Stock  Exchange,  and  they  now  occur  about  once  a  month.  Now,  if  a 
banker  wants  a  sum  of  money  for  a  short  time,  either  to  pay  off  a  deposit 
or  to  make  an  advance  to  a  customer,  he  will  direct  his  stock-broker  to 
sell,  say  £  50,000  consols  "  for  money,"  and  buy  them  "  for  time,"  that 
is,  against  the  next  "settling  day,"  or,  as  it  is  sometimes  called,  the 
next  **  account  day."  On  the  other  hand,  if  a  banker  hoe  money  he 
wishes  to  employ  for  a  short  time,  he  will  reverse  the  operation,  and  <!<•• 
•ire  his  broker  to  buy  consols  for  money  and  sell  them  for  time.  He 
thus  gets  interest  for  his  money,  according  to  the  difference  of  price  be- 
tween consols  for  time  and  consols  for  money.  Generally,  the  price  for 
time  is  higher  than  the  price  for  money;  and  the  difference  between 
these  two  prices  is  called  the  "  Continuation."  Supposing  that  the  next 
settling  day  is  a  month  distant,  and  the  continuation  is  one  eighth  per 
cent.,  that  amounts  to  twelve  eighths,  or  three  per  cent,  per  annum.  The 
will  vary  according  to  the  noar  approach  of  the  settling  day, 
of  money  and  tin-  market  rate  of  inten-M,  and 
or  scarcity  of  stock.  The  last  cause  is  not  so 


Jy  understood  by  the  public,  and  we  will  therefore  explain  it     The 

50 


Public  Debt. 

stock-jobbers,  as  we  have  said,  are  stock  merchants.  Of  course  they  are 
large  holders  of  stock  ;  it  is  their  capital,  on  which  they  trade.  But  how- 
ever large  may  be  the  sum  they  hold,  they  often  agree  to  sell  on  the  next 
settling  day  a  much  larger  sum,  expecting  that  in  the  mean  time  they 
shall  buy  a  large  sum,  and  thus  be  able  to  set  off  one  against  the  other. 
But  sometimes,  as  the  settling  day  approaches,  they  find  this  is  not 
the  case,  and  they  are  consequently  under  an  engagement  to  "  deliver," 
that  is,  sell,  more  stock  than  they  hold.  What  can  they  do  now  ?  They 
will  try  to  get  stock  from  those  who  have  it,  by  agreeing  to  buy  it  of  them 
now,  and  selling  it  at  the  ensuing  account  day,  a  month  hence,  at  the 
same  price  ;  thus  abolishing  the  "  continuation."  When  that  is  the  case, 
a  banker's  broker  will  go  to  the  banker  and  say,  "  If  you  like  to  lend 
your  consols,  you  can  get  money  for  nothing  till  the  next  account  day." 
The  banker  replies,  "  Well,  I  don't  know  that  I  can  make  much  interest 
of  the  money  just  now  ;  but,  as  I  can  lose  nothing,  you  may  lend  them." 
Thus  the  jobbers  get  their  stock,  and  complete  their  engagements.  But 
sometimes  the  jobbers  are  obliged  to  go  further,  and  even  to  offer  a  pre- 
mium to  parties  who  will  lend  their  consols.  This  premium  is  called 
"  Backadation  "  ;  it  is  just  the  reverse  of  "  continuation,"  and  implies 
that  the  time  price  of  stock  is  less  than  the  money  price. 

We  have  thus  described  the  legitimate  operations  of  the  Stock  Ex- 
change, so  far  as  it  may  be  necessary  to  explain  the  transactions  of  bank- 
ers in  the  employment  of  their  surplus  funds.  Those  operations  called 
"  Gambling  in  the  Funds,"  and  the  mode  in  which  the  brokers  and  job- 
bers settle  their  accounts,  we  shall  endeavour  to  describe  when  we  come  to 
speak  of  the  Clearing-house.  We  will  only  add  here  the  name  and 
amount  of  each  of  the  government  stocks  and  annuities,  as  they  stood  on 
the  5th  of  January,  1848. 

Capital  Stock  oftfie  Unredeemed  Debt  of  the  United  Kingdom,  on  5th  January,  1848. 
GREAT  BRITAIN.  ,.  * 

at*  S.      O, 

Debt  due  to  the  South  Sea  Company,  at  3  per  cent.,    .        .        .      3,662,784    8  6j 

Old  South  Sea  Annuities,  ditto,  .        .        .           3,195,16017  9 

New  South  Sea  Annuities,  ditto,  .        .        .      2,195,86716  9 

South  Sea  Annuities,  1751,  ditto,  .        .        .              500,78011  9 

Debt  due  to  the  Bank  of  England,  ditto,  .        .        .    11,015,100    0  0 

Bank  Annuities,  1726,  ditto,  .        .        .              750,404  18  6 

Consolidated  Annuities,  ditto,  .        .        .  371,824,981  15  ll£ 

Reduced  Annuities,  ditto,  .        .        .       121,924,219    8  7 


Total  at  3  per  cent  ......  515,069,29917  9j 

Annuities  at  3|  per  cent,          .....        .  215,700,549    5  1 

New  5  per  cent  Annuities,    ........         430,076    3  2 

Total,  Great  Britain,     .        .        .       731,199,925    6  0| 

IRELAND. 

Irish  Consolidated  Annuities,  at  3  per  cent,          ....       6,194,87415  2 

Irish  Reduced  Annuities,  ditto,  ....  128,29516  9 

Annuities  at  3|  per  cent,       ........    32,244,312  10  9 

Debt  due  to  the  Bank  of  Ireland,  at  3J  per  cent.,     .        .        .          2,630,769    4  8 

New  5  per  cent  Annuities,  .......  3,673  11  2 

Total,  United  Kingdom,         .        .  £772,401,851     4  6| 
51 


A  Trtatise  on  Banking. 

TW  AVXCAL  CBAMB  on  UM  NATIONAL  DRBT  WM  then  a*  follows :  — 

GKRAT  BRITAIN.  IRELAND. 

£         ».     ,1  £  ».    d. 

latsrtSt  OB  •nrmWmtd  asbt          .         .     22,48.1.850  13     \\  1,329,895  17     6 

lOfalltiadlfcUiSf  dSA,       .           3,685,696     6     5  160,394  2     1 

26,169.546  19     6|  1,490,289  19     7 
93,826   11    10 

Total,    ....         26,263,373  11     4j  1,490,289  19     7 


Grand  Total,   .    .  £27,753,66,1  10 
Tait  is  cxdaaiTS  of  £71.971  2*  9|</.  the  niiniinl  charge  on  stock  and  nnnuiiii  -  of 


Mmi",  ttamH"|t '"  the  namr«  of  the  Commi->ioiirr<,  on  luvount  of  .stock  tin- 
for  tsa  jsan  and  upward*,  and  of  nnrliuinnl  ilividrnd.i,  and  also  on  account 
anJ  bcquc*u,  but  which  turn  is  not  paid  or  provided  for. 


VIL— THE  ADMINISTRATION  OF  A  BANK  DURING 
A  SEASON  OF  PRESSURE. 

A  f  RKSSUBE  on  the  money  market  may  be  defined  a  difficulty  of  getting 
money  in  the  London  market,  either  by  way  of  discounting  bills,  or  of 
loans  upon  government  securities.  This  difficulty  is  usually  accompanied 
by  an  unfavorable  course  of  exchange,  a  contraction  of  the  circulation  of 
the  Bank  of  England,  and  a  high  rate  of  interest.  These  three  circum- 
stances have  the  relation  to  each  other  of  cause  and  effect.  The  unfavor- 
able course  of  exchange  induces  the  Bank  of  England  to  contract  her  cir- 
culation ;  and  the  contraction  of  the  circulation,  by  rendering  money 
more  scarce,  increases  its  value,  and  leads  to  an  advanced  rate  of  interest. 
The  removal  of  the  pressure  is  in  the  same  order,  —  the  foreign  ex- 
changes become  favorable,  the  Bank  of  England  then  extends  her  circu- 
lation, money  becomes  more  abundant,  and  the  rate  of  interest  falls. 
The  degree  to  which  the  exchanges  are  unfavorable  is  indicated  by  the 
slock  of  gold  in  the  Bank  of  England;  and  when  this  is  at  its  l«mi  st 
amount  the  pressure  may  be  considered  to  have  attained  its  extreme 
point;  for  as  the  amount  of  gold  increases,  the  bank  will  extend  her  cir- 
culation, and  the  pressure  will  subside.  (An  Inquiry  into  the  Causes  of 
ike.  Pressure  on  the  Money  Market  during  the  year  1839,  by  J.  W. 
Gilbart.) 

If  we  take  a  review  of  all  the  recent  pressures  on  the  money  market, 
we  shall  find  they  have  always  been  preceded  by  the  following  circum- 
stances. First,  by  abundance  of  money  ;  secondly,  by  a  low  rate  of  in- 
terest ;  thirdly,  by  some  species  of  speculative  investments.  The  prin- 
cipal pressures  that  have  occurred  of  late  years,  have  been  those  of 
>,  1836,  1839,  and  1847. 

The  following  is  Mr.  Horsley  Palmer's  opinion  of  the  causes  of  the 
pressure  of  1825,  as  stated  to  the  Bank  Committee  of  1832  :  — 

•  Will  TOO  cute  to  the  committee  what,  in  jour  opinion,  w:i>  t! .  nature  ond  the 
Starch  of  las  criafc  ia  1825  t  —  I  have  alway*  co'tuidcrcd  that  the  first  step  towards  the 

u 


Season  of  Pressure. 

* 

excitement  was  the  reduction  of  the  interest  upon  the  government  securities.  The 
first  movement  in  that  respect  was,  I  think,  upon  £  135,000,000  of  five  per  cents.. 
which  took  place  in  1823.  In  the  subsequent  year,  1824,  followed  the  reduction  of 
£80.000,000  of  four  per  cents.  I  have  always  considered  that  reduction  of  interests, 
one  fifth  in  one  case  and  one  eighth  in  the  other,  to  have  created  the  feverish  feeling  in 
the  minds  of  the  public  at  large,  which  prompted  almost  every  body  to  entertain  any 
proposition  for  investment,  however  absurd,  which  was  tendered.  The  excitement  of 
that  period  was  further  promoted  by  the  acknowledgment  of  South  American  republics 
by  this  country,  and  the  inducements  held  out  for  engaging  in  mining  operations,  and 
loans  to  those  governments,  in  which  all  classes  of  the  community  in  England  seem  to 
have  partaken  almost  simultaneously.  With  those  speculations  arose  general  specu- 
lation in  commercial  produce,  which  had  an  effect  of  disturbing  the  relative  values  be- 
tween this  and  other  countries,  and  creating  an  unfavorable  foreign  exchange,  whicti 
continued  from  October,  1824,  to  November,  1825,  causing  a  very  considerable  export 
of  bullion  from  the  bank,  —  about  seven  millions  and  a  half.  Commercial  specula- 
tions had  induced  some  bankers,  one  particularly,  to  invest  money  in  securities  not 
strictly  convertible,  to  a  larger  extent  than  was  prudent ;  they  were  also  largely  con- 
nected with  country  bankers.  I  allude  to  the  house  of  Messrs.  Pole  &  Co. ;  a  house 
originally  possessed  of  very  great  property,  in  the  persons  of  the  partners,  but  which 
fell  with  the  circumstances  of  the  times.  The  failure  of  that  banking-house  was  the 
first  decisive  check  to  commercial  and  banking  credit,  and  brought  at  once  a  vast 
number  of  country  bankers,  which  were  in  correspondence  with  it,  into  difficulties 
That  discredit  was  followed  by  a  general  discredit  throughout  London  and  the  in 
terior."  —  p.  47. 

With  regard  to  the  pressure  of  1836.  there  was  in  the  beginning  of 
that  year  no  appearance  of  distress  ;  but,  on  the  contrary,  every  symptom 
of  prosperity,  attended  by  its  usual  concomitant,  a  readiness  to  engage  in 
speculative  undertakings. 

The  following  description  of  this  period  is  taken  from  the  speech  of 
Mr.  Clay,  on  introducing  his  motion  respecting  Joint-stock  Banks,  May 
12,  1836:  — 

"  To  what  extent  the  operations  of  the  joint-stock  banks  may  have  contributed  to 
create  the  present  state  of  excitement  in  the  commercial  world,  must,  of  course,  be 
mere  matter  of  conjecture.  That  they  have  had  some  considerable  influence  is  proba- 
ble, from  the  fact  that  the  excitement  and  rage  for  speculation  is  greatest  in  those  parts 
of  the  kingdom  where  the  operations  of  those  establishments  have  been  most  active. 
London  has  been  comparatively  unmoved,  but  Liverpool  and  Manchester  have  wit- 
nessed a  mushroom  growth  of  schemes,  not  exceeded  by  the  memorable  year  1825.  I 
hold  in  my  hand  a  list  of  seventy  contemplated  companies  for  every  species  of  under- 
taking, which  h'ave  appeared  in  the  Liverpool  and  Manchester  papers  within  the  last 
three  months.  This  list  was  made  a  fortnight  or  three  weeks  since,  and  might  prob- 
ably now  be  considerably  extended.  It  is  impossible  also,  I  think,  not  to  suspect 
that  the  facility  of  credit,  and  consequent  encouragement  to  speculation,  to  which  I 
have  alluded,  cannot  have  been  without  its  effect  in  producing  the  great  increase  of 
price  in  almost  all  the  chief  articles  of  consumption  and  raw  materials  of  our  manu- 
factures. That  increase  has  been  enormous,  —  not  less  than  from  twenty  to  fifty,  and 
even  one  hundred  per  cent,  in  many  of  the  chief  articles  of  produce,  of  consumption, 
and  materials  of  our  manufactures." 

These  appearances  continued  with  little  alteration  until  the  month  of 
July,  when  the  Bank  of  England  raised  the  rate  of  discount  to  four  and  a 
half  per  cent.  It  then  became  known  that  there  had  been  a  demand  upon 
the  bank  for  gold  from  the  preceding  April,  and  this  measure  was  adopt- 
ed by  the  bank  as  a  means  of  rendering  the  foreign  exchanges  more  fa- 
vorable. This  being  found  ineffectual,  the  bank  in  September  raised  the 
rate  of  discount  to  five  per  cent.  Besides  raising  the  rate  of  interest,  the 
bank  adopted  other  measures  of  increasing  the  value  of  money.  A  large 
E*  53 


A  TVwKfiM  on  Batting. 

IHlMMrt  of  AmWJCtn  bills  upon  fint-nitr  houses  had  IM TII  offered  for  dis- 

oount  and  rejected.    A  high  degree  of  alarm  was  immediately  spread 

throughout  the  community.    The  dread  of  a  |>.mir  similar  u>  that  of  l  *••:.« 

nlraost  universally  prevailed.     Those  who  had  i  •••  unwilling  <<> 

•rade  became  suddenly  stagnant ;  the  prices  of  all  fi.mim.d- 

ities  fell  considerably;  and  numbers  of  commercial  houses,  chiefly  of  the 

seooad  das*,  suspended  payment.     Many  railway  and  other  pn.j, •<•  :.s  now 

uto  oblivion. 

The  alarm  that  existed  was  kept  tip  by  the  monthly  accounts  of  the 
Bullion  in  the  Bank  of  Kngland.  Tin-  public  returns  showed  a  gradual 
decline  from  April,  1836,  to  February,  IKH.  It  was  therefore  supposed, 
that  the  Bank  of  Kngland  would  be  under  the  necessity,  for  her  own 
nafety,  of  Still  further  contracting  her  issues,  and  thus  increasing  tin 
tsting  pressure.  This  apprehension  caused  all  persons  who  had  money 
lo  retain  it  m  their  possession,  nnd  bankers  and  others  withheld  accom- 
modation they  would  otherwise  have  Ix-en  disposed  to  grant. 

This  state  of  alarm  was  considerably  augmented  by  the  publication  of 
the  Report  of  the  Secret  Committee  of  the  House  of  Commons  upon  Joint- 
stock  Banks.  This  committee  had  been  appointed  on  the  motion  of  Mr. 
Clay,  the  Member  for  the  Tower  Hamlets,  whose  speech  on  the  occasion 
might  be  termed  a  bill  of  indictment  The  joint-stock  banks  had  rapidly 
increased ;  they  had  issued  small  shares  ;  they  had  large  nominal  capitals ; 
they  had  circulated  an  excessive  amount  of  notes ;  they  had  promoted 
speculation.  These  were  the  charges  brought  against  them ;  and  they 
had  greater  weight,  from  being  advanced  by  a  member  who  was  known  to 
be  friendly  to  joint-stock  banking.  The  report  of  the  committee  appeared 
to  sustain  all  Mr.  Clay's  accusations.  This  report  was  highly  creditable. 
to  the  talents  and  industry  of  the  committee,  but  marked  by  a  decided 
hostility  of  tone.  While  it  enumerated  all  the  actual  or  possible  imper- 
fections of  the  joint-stock  banks,  it  ascribed  to  them  scarcely  a  single  ex- 
cellence. At  the  same  time,  the  committee  deferred  to  the  succeeding 
session  the  proposal  of  any  measures  for  their  improvement ;  thus  the 
public  were  led  to  suppose,  that  in  the  following  session  some  astringent 
measures  would  be  adopted  with  reference  to  joint-stock  banks,  but  what 
they  would  be  none  could  conjecture. 

(lad  the  report  appeared  at  any  other  period  it  might  possibly  have 
done  good;  but  as  its  appearance  was  contemporaneous  with  a  pressure 
on  the  money  market,  and  a  high  state  of  alarm,  it  unquestionably  tended 
to  weaken  public  confidence  at  a  time  when  it  required  to  be.  strengthened. 
Persons  who  were  unfriendly  to  joint-stock  banks  seized  the  opportunity 
. ^praising  them,  and  believed,  or  pretended  to  believe,  that  the.  hanks 
were  unsound,  and  would  certainly  stop  payment.  Others,  who  were 
friendly,  were  apprehensive  that  the  banks,  being  still  in  their  infancy, 
would  be  found  too  weak  to  withstand  the  storm  now  r  n<  them. 

But  though  this  alarm  began  with  respect  to  joint-stock  banks  it  did  not 
end  there.  It  was  soon  foreseen  that  if  a  few  joint-stock  banks  were  to 
•top  payment,  the  private  banks  in  their  neighlHiurhood  would  be.  put  to  a 
tevere  trial ;  and  if  the  banks  should  even  be  compelled  to  withhold  their 
advances  to  their  customers,  the  credit  of  individuals  must  sufler. 

51 


Season  of  Pressure. 

Hence  the  private  bankers  and  the  merchants,  as  well  as  the  joint-stock 
banks,  made  preparations  to  meet  any  event  that  might  occur,  and  by  thus 
increasing  the  pressure  on  the  London  money  market  occasioned  still  fur- 
ther apprehensions. 

The  alarm  was  augmented  by  the  stoppage  of  the  Agricultural  and 
Commercial  Bank  of  Ireland  in  the  month  of  November,  and  the  demand 
for  gold  which  that  stoppage  occasioned  in  Ireland.  The  joint-stock 
banks  of  England  now  became  subject  to  increased  suspicions ;  the  ac- 
commodation they  had  been  accustomed  to  obtain  by  the  rediscount  of 
their  bills  in  the  London  market  was  considerably  restricted  ;  and  in  the 
beginning  of  December,  the  Northern  and  Central  Bank  at  Manchester,  a 
bank  having  a  paid-up  capital  of  .£800,000,  with  above  1,200  partners, 
and  forty  branches,  applied  for  assistance  to  the  Bank  of  England.  This 
was  afforded  upon  condition,  in  the  first  instance,  that  they  should  wind 
up  all  their  branches  except  that  at  Liverpool ;  and  afterwards  further  as- 
sistance was  granted,  upon  condition  they  should  discontinue  business  after 
February,  1837.  Soon  afterwards,  the  old  and  respectable  London  bank- 
ing-house of  Messrs.  Esdaile  &  Co.'  received  assistance  upon  similar 
terms. 

The  pressure  which  existed  in  England  rapidly  extended  to  America. 
A  large  amount  of  American  securities,  consisting  chiefly  of  bonds  of  the 
respective  States,  had  been  remitted  to  the  agency  houses  in  England. 
This  circumstance,  in  connection  with  the  exportation  of  gold  to  America, 
attracted  the  notice  of  the  Bank  of  England.  A  large  amount  of  bills 
drawn  from  America  upon  first-rate  London  houses  was  rejected.  In 
America  the  pressure  became  severe  ;  money  was  wanted  to  remit  to 
England  to  meet  the  drafts  that  had  been  drawn  upon  England,  either 
upon  credit  or  against  securities  that  could  not  now  be  sold.  The  rate 
of  discount  at  New  York  rose  to  two,  and  even  to  three  per  cent,  per 
month. 

From  the  pressure  upon  the  money  market,  and  from  the  great  fall  in 
the  price  of  American  produce,  the  cotton  and  other  commodities  sent 
from  America  to  meet  drafts  upon  the  English  agents  could  not  be  sold 
except  at  a  ruinous  loss.  And  other  remittances  not  having  arrived,  sev- 
eral houses  in  the  American  trade,  who  were  said  to  have  given  extensive 
credit  to  parties  in  America,  applied  for  assistance  to  the  Bank  of  Eng- 
land. ( The  History  of  Banking  in  America ;  with  an  Inquiry  how  far 
the  Banking  Institutions  of  America  are  adapted  to  this  Country ;  with  a 
Review  of  the  Causes  of  the  recent  Pressure  on  the  Money  Market.  By 
J.  VV.  Gilbart.  1837.) 

Such  was  the  character  of  the  pressure  of  1836.  We  next  proceed  to 
the  pressure  of  1839.  The  pressure  of  1836  may  be  said  to  have  com- 
menced from  the  month  of  May  in  that  year.  From  that  month  the  stock 
of  gold  in  the  bank  gradually  and  uniformly  declined  until  February, 
1837,  when  it  reached  its  lowest  point  of  depression.  From  this  point  it 
uniformly  advanced :  the  lowest  point  of  the  circulation  was  in  Decem- 
ber, 1836,  though  even  then  it  was  not  lower  than  it  had  been  in  the  pre- 
ceding January.  The  bank  raised  the  rate  of  interest  from  four  to  foui 
and  a  half  per  cent,  in  July,  and  to  five  per  cent,  in  the  following  Sep- 

55 


A  Treatise  a*  Hanking. 

h»mber.     During  the  whole  of  the  ycnr  1S17,  th<-  amount  of  j;<>M  in  ihr 
md  continued  to  increase  ;  th-    hank  extended  IUT  circula- 
tion, ami  ho  July  dividend*,  moneN   I.., •.,,,„. 
abundant,  and  the  market  rate  of  interest  experience.;  able  fall. 
The  foreign  exchange*  continued  t,.  be  favorable  during  tin-  early  part  of 
1838,  and  gold  ac<                    in  tin-  rollers  of  the  Hank  of  England.      In 
the  spring  of  that  year  the  directors  of  tin-  Hank  <>f  F.nu'land  sent  nearly  a 
million  of  gold  to  America.      M'»m  y  hi  came  increasingly  abundant,  and 
•  rvit  fell.      In  February  tin-  kink  reduced  tlu-ir  rate  (,f  dis- 
atSJSJl  lO  '     •'    I"  :    ••:.'.  and   t'ie    interest  on  the  loans    irranted   during  the 
«hu!tm_'  »f  tlie  funds  was  reduced  in  Mnrch  to  three  and  a  half  per  cent. 
The  low  rate  of  interest  caused  large  sums  (,f  money  to  l>e  invented  in 
American  securities.    Bonds  of  all  kinds  issued  by  the  Mank  of  the  I'nitcd  ' 
>•                                                      :ii   the  I'nion,  and    by  ii'iineron-   private   un- 
dertakings, were  poured  upon  the  English  market,  and  found  eager  pur- 
chasers.    Several  of  the  directors  of  the  Hank  of  England,  in  their  indi- 
vidual character  as  merchants,  became  agents  for  the  distribution  of  these 
securities.     About  July   the  exchanges  became  unfavorable,  and   in   the 
latter  part  of  the  year  some  symptoms  of  uneasiness  were  apparent  in  the 
money  market ;  but  as  the  stock  of  bullion  in  the  Hank  of  England  was 
considerable,  and  the  directors  granted  their  usual  loans  in  1  >ecember  at 
three  and  a  half  per  cent.,  public  confidence  was  not  shaken.     In  the  be- 
ginning of  the  year  1839  the  exchanges  became  increasingly  unfavorable. 
and  the  monthly  returns  of  the  bank  showed  a  gradual  diminution  in  the 
stock  of  gold.     The  price  of  corn  rose  so  high  as  to  admit  of  fon-i'_rn 
wheat  at  the  lowest  rate  of  duty.     This  occasioned  a  further  demand  lor 
gold  to  be  exported.     The  stock  of  gold  in  the  Bank  of  Englaiid   rapidly 
declined,  until,  in  the  month  of  October,  it  was  no  more  than  £2,536,000, 
while  the  liabilities  of  the  kink  upon  notes  amounted  to  £  17,<»lvJ.(M)0,  and 
upon  deposits  to  £  6,734,000.     The  bank  directors  were  very  anxious  to 
stop  this  demand  for  gold.     With  thus  view  they  raised  the  rate  of  int- 
on  May  16th  to  five  per  cent.,  on  June  20th  to  live  and  a  half  per  cent.. 
and  on  August  1st  to  six  per  cent.  ;  and  they  charged  the  same  rate  upon 
their  short  loans.     They  are  supposed  to  have  sold  large  amounts  of  gov- 
ernment stock  and  exchequer  bills,  and  on  July  13th  they  announced  that 
they  were  ready  to  receive  proposals  for  the  sale  of  tin-  dead  weight. 
None  of  the  offers,  however,  met  their  approbation.     Finding  these  meas- 
ures not  speedily  effective,  an  arrangement  was  made  with  the  Hank  of 
Prance  for  a  loan  of  if  2,500,000.     Messrs.  Harin^  A;  Co  drew  hills  on 
account  of  the  Bank  of  England  upon  hou.es  in  Paris  for  \\\\<  amount, 
which  the  Bank  of  France  undertook  to  discount.     The  directors  also  de- 
termined to  refuse  to  discount  any  bills  drawn  or  indorsed  by  any  prhate 
or  joint-stock  bank  of  issue.     Notwithstanding  these  n                 'he  stix-k 
of  gold  in  the  bonk  continued  to  decrease  until  the  18th  of  <>•••< iber,  \vhen 
it  reached  the  lowest  point  of  depression.     From  this  point  it  continued  to 
advance,  and  the  pressure  began  gradually,  but  slowly,  to  ml 

It  may  be  useful  to  notice  the  dili'erei,  n  the  pressure  of  1836 

and  that  of  1839.     If  we  measure  the  intensity  of  the  pn--n:v  by  the 
between  the  largest  and  the   lowest  stock  of  gold   in   the 
56 


Season  of  Pressure. 

Bank  of  England,  the  former  pressure  will  range  from  .£7,801,000  to 
,£4,032,000,  and  the  latter  from  £  10,126,000  to  £  2,525,000.  In  the 
pressure  of  1836,  one  joint-stock  bank,  a  London  private  bank,  two  coun- 
try private  banks,  three  large  American  agency  houses,  and  a  great  many 
respectable  merchants,  stopped  payment.  In  the  pressure  of  1839,  there 
was  scarcely  a  failure  until  the  month  of  December,  and  then  only  among 
the  second  class  of  traders.  In  the  pressure  of  1836,  the  prices  of  nearly 
all  commodities  fell  considerably,  and  almost  immediately.  In  the  pres- 
sure of  1839,  the  prices  of  most  commodities  remained  for  a  length  of 
time  nearly  the  same.  In  1836,  the  Bank  of  England  did  not  raise  their 
rate  of  interest  above  five  per  cent.  In  1839,  the  rate  of  interest  upon 
both  discounts  and  loans  was  raised  to  six  per  cent.  In  1839,  the  bank 
gave  notice  that  they  were  willing  to  sell  the  dead  weight,  and  they  made 
arrangements  for  borrowing  <£  2,500,000  sterling  from  the  Bank  of  France. 
In  1836,  the  bank  adopted  neither  of  these  measures.  In  1836,  the  Bank 
of  England  rejected  all  bills  drawn  or  indorsed  by  joint-stock  banks  of 
issue.  In  1839,  they  rejected  also  all  bills  drawn  and  indorsed  by  private 
banks  of  issue.  (An  Inquiry  into  the  Causes  of  the  Pressure  of  1839.) 

The  consideration  of  the  pressure  of  the  year  1847  we  shall  postpone 
to  the  next  section  of  our  work. 

From  the  statements  we  have  made,  it  would  appear  that  a  season  of 
pressure  is  always  preceded  by  one  of  speculation ;  and  hence  it  follows 
that  a  banker  who  wishes  to  be  easy  in  a  time  of  pressure  must  act  wisely 
in  the  previous  season  of  speculation.  It  requires  no  ordinary  firmness  to 
do  this.  To  act  wisely  in  a  season  of  speculation  is  far  more  difficult 
than  to  act  wisely  in  one  of  pressure.  But  unless  a  banker  act  wisely  in 
the  previous  time  of  speculation,  his  wisdom  will  probably  be  of  little 
avail  when  the  pressure  arrives. 

While,  therefore,  money  is  still  abundant,  the  public  funds  high,  and 
other  bankers  liberal  in  accommodation,  he  should  be  doubly  cautious 
against  taking  bills  of  a  doubtful  character,  or  making  advances  upon 
irregular  securities.  He  should  not  suffer  the  desire  of  employing  his 
funds,  or  the  fear  of  offending  his  customers,  to  induce  him  to  deviate 
from  sound  banking  principles.  He  should  also  take  this  opportunity  of 
calling  up  all  dead  or  doubtful  loans,  and  of  getting  rid  of  all  weak  cus- 
tomers. He  should  also,  under  any  circumstances,  avoid  making  ad- 
vances for  any  length  of  time,  and  investments  in  securities  that  are  not 
at  all  times  convertible,  or  the  price  of  which  is  likely  to  sustain  a  great 
fall  on  the  occurrence  of  a  pressure.  The  discount  of  first-rate  commer- 
cial bills  having  a  short  time  to  run,  or  short  loans  on  stock  or  other  unde- 
niable security,  however  low  the  interest  received,  seem  to  be  the  most 
safe  and  advantageous  transactions. 

When  the  aspect  of  affairs  seems  to  threaten  that  money  will  be  still 
more  in  demand,  and  the  failure  of  a  number  of  merchants  and  traders 
may  consequently  be  apprehended,  it  behoves  him  to  prepare  for  ap- 
proaching events  by  avoiding  all  discounts  of  bills  of  an  inferior  class,  and 
by  keeping  his  funds  in  an  available  state.  With  a  view  to  these  objects, 
he  will  review  all  his  loan  and  discount  accounts,  call  up  his  loans  of  long 
standing,  where  it  can  be  done  without  injury  to  the  interest  or  reputation 

57 


A  Treaiist  on  Banking. 

of  his  hank,  avoid  all  overdrawn  accounts,  ami  miner  tin-  amount  of 
counts  on  ia§  of  accounts.     In  performing  these  operatiocM 

he  will  exercise  due  judgment  mnl  .Ucrrti.m,  making  pn>p,-r  ,'  -•  n.-t,,,;,-, 
••en  his  customers,  nnd  n-.ln.Mni:  chiefly  those  hills  which  arc  of  an 
unbusineei  character,  or  which  are  drawn  IIJHUI  doubtful  people,  or  upon 
partiwi  that  he  knows  nothing  about  ;  he  will  also  mark  particularly  t'n.  -• 
account -•»  ^  urr  large  discounts,  but  keep  no  corresponding  balance 

to  the  credit  of  their  current  accounts. 

As  the  pressure  advances,  he  will  find  that  then-  arc  three  .!•  nmnds 
upon  bis  funds  I  •-•.  his  customers  will  reduce  their  balances,  ami  keep 
l?«  money  in  his  hands.  Money  lodged  at  interest  will  he  taki-n  awa\. 
because  the  parties  can  make  higher  interest  elsewhere,  or  they  will  he 
tempted  by  the  low  price  of  stock  to  invest  it  in  govenmn  ni  si enrities. 
Secondly,  he  will  have  a  greater  demand  for  loans  and  discounts,  not 
merely  from  weak  people  whom  he  might  not  care  about  refusing,  hut 
from  persons  of  known  wealth,  whom  it  is  his  interest  and  his  inclination 
to  oblige.  Thirdly,  he  will  think  it  prudent  to  guai<:  'nld.-n  de- 

mand* by  keeping  a  larger  amount  of  bank  notes  in  his  till.  To  meet  all 
these  demands,  he  will  he  compelled  to  realize  some  of  his  securities,  and 
he  will  realize  those  first  on  which  he  will  sustain  no  loss. 

If  a  banker  has  money  lying  at  demand  with  n  bill-broker,  he  will  now 
have  occasion  to  call  it  in.  If  he  has  money  lent  at  short  periods  nt  tin- 
Stock  Exchange,  he  will,  as  he  has  occasion,  take  in  the  mom  y  as  tl.e 
loans  fall  due.  If  he  has  discounted  brokers'  bills,  he  will  receive  ii  .- 
amounts  when  due,  and  discount  no  more.  Should  these  operations  not 
be  sufficient  to  meet  the  demands  upon  his  funds,  he  will  then  sell  his 
stock  or  exchequer  bills,  or  borrow  on  them  in  the  money  market.  A 
country  banker  who  has  kept  his  reserve  in  bills  of  exchange  will  be 
anxious  to  rediscount  them,  and  will  think  himself  lucky  if  he  can  do  so 
readily  and  at  a  moderate  rate  of  inter' 

It  will  be  useless  for  a  banker  to  attempt  to  call  up  dead  loans,  or  to  re- 
duce his  discounts,  after  the  pressure  bus  commenced.  He  should  ha\e 
thought  of  these  matters  in  the  previo  |  of  abundance.  .A 

cannot  get  in  any  outstanding  advances,  he  had  better  not  ask  for  them. 
but  merely  charge  the  parties  an  increased  rate  of  interest.  If  he-  demand 
the  money,  he  will  not  get  it,  and  he  ma\  »a  surmise  that  he 

is  short  of  funds.    This  season  of  p;  .  in.wever,  a  -j"od  opportunity 

for  calling  up  advances,  or  getting  rid  of  connections  that  he  would,  on 
other  grounds,  like  to  be  without.     The  "scarcity  of  mom \,"  • 
sure  on  the  money  market,"  are  capital  reasons  to  assign  tor  refusing  ap- 
plications which,  even  otherwiv.  he  would  refuse,  and  for  calling  up  loans 
.  under  any  circumstances,  he  would  like  to  see  repaid. 

I 'uring  a  pressure,  a  banker  will  have   to  give   a   great   many  r.  : 
and  some  discretion  will  be  necessary  in  th<-  form  of  giving  these  red: 
Let  him  refuse  in  what  way  he  may  at  such  a  season,  hu  will  be  sure  to 
give  offence.     And  the  party  refused  will  possibly  publish  the  n -fu-al,  and, 
from  motives  of  ignorance  or  malignity,  r«-pr<-s<-nt  the  refusal  as  having 
arisen  from  want  of  means,  and  possibly  may  circulate  a  report  that  the- 
banker  is  about  to  stop  paym.-nt.     :  mors  about  banks  are.  always 


Season  of  Pressure. 

rife  in  seasons  of  pressure,  and  they  add  to  the  general  want  of  confidence 
which  then  prevails. 

During  a  pressure,  a  banker  will  have  offers  of  new  accounts  to  be 
transferred  from  other  bankers,  provided  he  will  consent  to  make  certain 
advances.  Some  caution  must  be  exercised  in  this  matter.  It  is  quite 
possible  that  some  perfectly  safe  parties,  having  large  accounts,  may  be 
disposed  to  remove  in  consequence  of  their  present  bankers  not  being 
equal  to  the  supply  of  their  wants.  In  this  case,  the  banker  will  be  regu- 
lated by  the  value  of  the  proposed  account,  and  the  extent  of  his  own 
means.  On  the  other  hand,  it  is  equally  possible  that  weak  people,  to 
whom  their  present  bank  might  not,  in  any  case,  have  given  advances, 
may  use  the  "  scarcity  of  money  "  as  a  pretext  for  making  application  to 
a  new  banker,  stating  their  belief  that  their  old  banker  was  unable  to  meet 
their  requirements.  It  behoves  a  banker  to  use  much  discretion  in  such  a 
case,  especially  if  it  be  a  large  account.  If  he  errs  at  all,  he  should  err 
on  the  side  of  caution. 

It  will  rarely  be  wise  for  a  banker  in  a  season  of  pressure  to  attempt  to 
get  away  the  customers  of  other  bankers  by  offering  them  greater  accom- 
modation. The  best  way  of  getting  new  connections  is  to  treat  well  those 
that  he  has.  It  is  better  for  a  banker  to  employ  his  funds  in  supporting 
his  old  friends  than  in  attempting  to  get  new  ones.  If  his  funds  are  so 
ample  that  he  can  do  both  without  inconvenience,  very  well.  But  caution 
is  necessary  in  taking  new  accounts  at  this  time,  and  he  should  be  doubly 
cautious  in  making  applications  to  parties.  Unless  he  has  the  most  ample 
and  satisfactory  information  as  to  their  circumstances,  he  had  better  wait 
until  they  apply  to  him.  It  would  then  devolve  upon  them  to  satisfy  him 
that  he  would  be  justified  in  making  the  advances  required. 

During  the  pressure,  a  banker  will  find  that  some  of  his  wealthier  cus- 
tomers, who,  when  money  was  abundant,  took  their  bills  to  be  discounted 
by  a  bill-broker,  because  he  would  cash  them  at  a  lower  rate,  will  come 
back,  and  expect  to  have  discounts  from  their  banker.  This  is  no  fault  of 
the  bill-brokers.  People  put  money  in  their  hands  avowedly  for  tempo- 
rary purposes.  In  seasons  of  abundance  the  bill-brokers  are  glutted  with 
money.  When  the  pressure  commences  this  money  is  withdrawn.  The 
consequence  is,  that  in  seasons  of  abundance  the  bill-brokers  will  discount 
at  a  lower  rate  than  the  bankers,  and  when  money  is  scarce  they  discount 
at  a  higher  rate,  and  in  many  cases  not  discount  at  all.  Sharp-sighted 
people,  who  are  acquainted  with  the  London  money  market,  will,  when 
money  is  abundant,  take  all  their  first-rate  bills  to  a  bill-broker,  and  send 
to  their  banker  all  their  inferior  bills,  which  a  bill-broker  would  not  take. 
Now,  if  a  banker  has  occasion  to  curtail  his  advances  in  seasons  of  pres- 
sure, he  should  begin  with  people  of  this  sort.  But  if  he  has  ample  means, 
and  the  parties  are  wealthy,  he  may  deem  it  worth  his  while  to  take  their 
bills,  charging  a  high  rate  of  interest,  and  gently  reminding  them  of  their 
former  delinquencies.  Exhortations  to  good  behaviour  have  always  a 
greater  effect  when  administered  in  seasons  of  affliction.  And  reproof  at 
this  time  to  a  party  who  had  thus  wandered,  may  induce  him  to  pursue  in 
future  a  more  righteous  line  of  conduct. 

During  a  pressure,  a  banker  will  find  that  some  of  his  customers  will 

59 


A    TrtatiM  on  Banking. 

,  and  will  apply  to  him  for  ambiance.  He  will  oftch  be 
at  •  IM  to  dteide  whether  he  should  <>r  should  not  grant  the  assistance 
required.  This  hesitation  will  arise  t'nun  his  doubts  as  to  the  «  xt.-nt  to 
which  he  can  prudently  rely  upon  the  ralrul.v. .•!•,-  and  anticipations  ofliis 
customer.  The  party  states  that  he  must  immediately  stop  p.-iyim -nt  un- 
leM  he  has  assistance ;  but  he  has  abundan.-e  ,,:'  |.i-,.|..-riy,  and  lus  dillicul- 
tice  arise  only  from  not  being  able  to  reali/r  it.  If  I..  Mm  sum 

he  can  then  go  on  comfortably.  The  kuiki-r  grants  him  thi>  ^.\-.\.  At';<  r 
m  while,  he  comet  again,  and  states  he  must  now  stop  unless  In-  has  a  fur- 
ther sum.  The  banker  hesitates,  but  ultimately  gives  him  this  further 
•«:'n  He  comes  a  thin!  tim-  has  not  yet  got  enough  ;  and 

uot  being  able  to  get  more.  In-  then  slops,  leaving  tin-  hanker  ut  best  with 
a  large  luck-up,  and  probably  with  an  ultimate  loss. 

:ig  a  pressure,  those  hanks  that  allow  interest  on  deposits  will  ho 
asked  for  a  higher  rate  of  interest  It  is  quite  right  that  those-  parties  who 
hare  had  deposits  at  the  bonk  for  some  time,  should  receive  a  higher  rate 
of  interest,  proportionate  to  the  increased  value  of  money.  But  it  may  be 
questioned  whether  it  is  worth  while  to  reeeive  further  lodgments,  during 
a  pressure,  at  a  high  rate  of  interest,  unless  they  arc  lodged  fora  fixed 
period.  For,  should  the  pressure  increase,  these  sums  are  sure  to  be  with- 
drawn, or  else  applications  will  be  made  for  a  higher  rate  of  interest  than 
the  banker  can  prudently  give.  Nor  must  it  be  forgotten  that  it  is  not 
wise  for  a  banker  to  give,  during  a  panic,  an  extravagant  rate  of  interest. 
Should  he  do  so,  he  will  give  rise  to  an  opinion  that  he  is  short  of  funds, 
and  this  may  cause  more  deposits  to  be  w  ithdrawn  than  he  would  obtain 
from  his  high  rate  of  inter 

During  a  pressure,  a  banker  will  pay  considerable  attention  to  the  pub- 
lished returns  of  the  Bank  of  England.  The  increase  or  diminution  of  the 
gold  and  silver  in  the  issuing  department  will  show  the  progress  of  the 
pressure.  As  these  increase,  money  will  become  less  scarce,  the  rate  of 
interest  will  fall,  and  the  pressure  will  subside.  In  this  department,  it  is 
the  progress  of  increase,  or  diminution,  more  than  the  actual  amount,  that 
should  be  the  main  object  of  attention.  The  hanking  department  resem- 
bles any  other  bank.  Its  means  are  the  paid-up  capital,  the  real  or  sur- 
plus fund,  the  public  deposits,  the  priva;  -,  and  the  seven-day  bills. 
These  means  are  employed  in  public  securities,  private  securities,  and 
cash  in  the  till.  Its  ability  to  make  advances,  at  any  given  time,  depends 
on  the  amount  of  cash  in  the  till.  The  diminution  of  this  amount  sho\\  -< 
the  increase  of  the  pressure,  and  the  banker  will  act  accordingly. 

As  far  as  past  experience  goes,  all  panics  or  pressures  have  resulted  in 
a  subsequent  abundance  of  money.  It  would  be  a  grand  thing  for  a 
banker  if  he  could  know  beforehand  at  what  precise  point  this  change 
would  take  place.  But  this  he  cannot  know,  and  he  had  better  not  specu- 
late on  the  subject,  but  just  follow  the  course  of  events  as  they  occur. 
When,  however,  the  point  is  fairly  turned,  he  will  act  wisely  in  investing 
all  his  surplus  funds  in  such  convertible  securities  as  are  likely  to  advance 
in  price,  from  the  increasing  low  rate  of  interest.  Exchequer  bills  are 
most  likely  to  be  the  first  affected,  and  then  the  public  funds.  He  will, 
also,  be  more  liberal  in  granting  discounts,  and  other  advances,  and  he 

60 


The  Bank  Act  of  1844. 

will  lower  the  rate  of  interest  at  which  he  takes  deposits.  At  the  same 
time  he  will  be  cautious  in  the  bills  he  discounts.  For,  though  money 
may  be  abundant,  yet  trade  may  be  depressed,  and  the  effects  of  the  pre- 
vious panic  may  be  the  failure  of  a  great  number  of  persons  in  the  middle 
class  of  society.  The  banker  will  therefore  be  cautious  in  extending  his 
discounts,  except  on  bills  of  an  undoubted  character. 

We  will  observe,  lastly,  that,  in  a  season  of  pressure  it  is  peculiarly  ne- 
cessary that  a  banker  should  pay  regard  to  the  state  of  his  own  health,  and 
to  the  discipline  of  his  own  mind,  so  as  to  guard  against  any  morbid  or 
gloomy  apprehensions  with  regard  to  the  future.  He  should  attempt  tc 
form  a  cool  and  dispassionate  judgment  as  to  the  result  of  passing  events ; 
endeavouring  so  to  arrange  his  own  affairs  as  to  be  prepared  for  whatever 
may  occur,  but  taking  care  not  to  increase  the  present  evil  by  predicting 
greater  calamities.  If  he  suffer  a  feeling  of  despondency  to  get  the  mas- 
tery of  his  mind,  he  will  be  less  able  to  cope  with  the  difficulties  of  his 
position.  He  will  then,  probably,  refuse  reasonable  assistance  to  even 
first-rate  customers,  realize  securities  unnecessarily  at  a  heavy  sacrifice, 
and  keep  in  his  till  an  amount  of  unemployed  treasure  excessively  dispro- 
portionate to  the  extent  of  his  liabilities.  This  will  increase  the  pressure. 
Fear,  too,  is  always  contagious.  A  banker  of  this  melancholy  tempera- 
ment will  impart  his  apprehensions  to  others,  and  thus  the  panic  will  be- 
come more  widely  extended. 


SECTION  VIII.  — THE  ADMINISTRATION  OF  A  BANK  UNDER 
THE  ACT  OF  1844. 

IT  would  not  be  consistent  with  the  practical  character  of  this  work  to 
discuss,  at  great  length,  any  theory  of  the  currency.  But  the  Act  of  1844, 
though  founded  on  a  theory,  was  a  practical  measure,  and  has  so  impor- 
tant a  bearing  on  the  administration  of  banking  affairs,  that  our  work  would 
be  regarded  as  incomplete  were  the  subject  altogether  omitted.  We  shall, 
however,  endeavour  to  avoid  any  observations  on  its  theory,  and  confine 
our  remarks,  as  much  as  we  can,  to  the  operation  of  its  practical  enact- 
ments. In  this  part  of  our  work  it  will  be  necessary  to  consider  only 
those  provisions  of  the  Act  which  refer  to  the  issue  of  notes  by  the  Bank 
of  England  :  those  which  refer  to  the  country  circulation  will  more  prop- 
erly come  under  review  in  the  section  upon  Country  Banks.  It  may  also 
be  proper  to  remark,  that,  in  our  judgment,  the  Act  of  1819  has  no  neces- 
sary connection  with  the  Act  of  1844 ;  nor  would  there  be  any  inconsis- 
tency in  advocating  the  one  and  not  advocating  the  other.  (Commons, 
3,409.) 

"  The  Act  of  1844 "  is  the  7  &  8  Viet.  cap.  32,  and  is  entitled, 
"  An  Act  to  Regulate  the  Issue  of  Bank  Notes,  and  for  giving  to  the  Gov- 
ernor and  Company  of  the  Bank  of  England  certain  privileges  for  a  lim- 
ited period."  It  enacts  that,  from  and  after  the  31st  August,  1844,  the 

F  61 


A  Treatise  on  Banking. 

department  of  the  Bank  of  England  shall  be  separated  from  tho 
Ilnnking  department  ;  tliut  tin-  is-mini:  department  may  I-MM-  notes  to  the 
cxtrir  '  1  1. 1  "><M  mi  i  u|x>n  Heourities  set  npnrt  for  that  purpose,  of 

li  the  debt  of  ''  1  l.<M."i,100  due  from  the  government  to  tin-  l>ank 
shall  form  a  part;  that  no  amount  of  note*  al«>\e  .£  1 -1, 000,000  shall  he 
imu-  against  gold  coin,  or  gold  or  silver  bullion  ;  and  that  the 

r  bullion  shall  not  exceed  OHO  fourth  the  amount  of  p>ld  coin  and  bul- 
lion. Any  person  H  entitled  to  demand  notes  from  the  issuing  depart- 
mge  for  gold  bullion,  nt  the  rate  of  .£3  17*.  9J.  per  ounce. 

ild  any  banker  discontinue  his  issue  of  notes,  the  Hank  of  Knjzland 
may,  upon  application,  !»•  empowered  by  an  Order  of  Council  to  increaw 
her  issue  upon  securities  to  the  extent  of  two  thirds  of  the  issue  thus  with- 
drawn ;  but  all  the  profit  of  this  increased  issue  must  go  to  the  govern- 

ment. 

The  theory  on  which  this  act  wns  founded,  had,  for  several  years  pre- 
viously, been  brought  before  the  puhlic  in  pamphlets  written  by  men  of 
distinguished  talent.  Upon  some  of  these  pamphlets  we  wrote  a  critique, 
which  appeared  in  the  "  Westminster  Review"  of  January,  1841.  That 
article  was  afterwards  published  separately,  under  the  title  of  "Currency 
and  Banking :  a  Review  of  some  of  the  Principles  ;md  Plans  that  ha\e 
recently  engaged  public  attention  with  reference  to  the  administration  of 
the  Currency."  In  this  review  we  made  the  following  observations  on 
the  plan  then  proposed,  and  subsequently  carried  out  in  the  act  of 
KM*:— 

"  TV  plan  of  making  the  amount  of  the  riratlnt inn  Jlucttuilf.  in  exact  correspondence  with  the 
amount  ofyotd  in  the  Btmk  of  England. 

u  This  plan  it  open  to  the  following  objections :  — 

u  t.  Upon  this  plan  then-  must  he  11  perpetual  increase  and  diminution  in  the  stock 
of  gold;  consequently,  a  perjM-uinl  increase  and  diminution  in  the  amount  of  the  eur- 
rency.     The  in«Tease  in  tin-  amount  of  the  cum  IK  y  would  rai-c  prices  and  stimulate 
•peculation.     The  diminution  in  the  amount  of  the  currency  would  reduce  prices  ai.<t 
prodnce  distress.     And  thus  there  must  he  a  constant  alternation  from  high  [>ri 
low  price*,  and  again  from  low  prices  to  high  prices,  —  from  speculation  to  di- 
and  from  diitmsi  to  speculation. 

"  S.  Bat  depression  of  price-,  and  their  attendant  mi>erir<.  may  not   !><•  experienced 
only  when  the  foreign  exchanges  are  unfavoruMo.     K\i-e»iv<-  luution,  an  appn-hen- 
•ioa  of  war,  or  political  feelini;,  maycau.se  a  dome-tic'  demand  for  p>ld.  and  thi>  would 
OMSS  fcf  »  while  •  contraction   of  the  currency   !tn   severe  as  that  which  would 
from  an  unfavorable  exch:tn_  the  hank  directors  would  have  no  diM-ivtiunurv 

power,  h«t  would  be  required  'to  adhere  to  principle,'  hy^ixii.L,'  irold  i. 
notes  tor  gold,  the j  could  do  nothing  to  a*-  mine-..     According   to 

Mr.  Lord,"  a  drain,  from  whatever  CHUM  it  max  :>ri-c,  HUM  !«•  met  l.y  a  contra'"  < 
the  nureory.     Mr.  Palmer,  in  laying  down  his  rule,  put  in  a  saving  dau>c,  —  '  exc  ej.t 
wkUr  mcial circumstances,' —  h'ut  .Mr.  I.oy.l  makes  no  except^ 

'  carry  this  system  into  operation  would  recjuire  a  .separation  of  the  issuing 
department  from  the  other  departments  of  the  hu.sine.ss  of  the  Kauk,  and  this  \M.U  .| 
OMHS  still  further  meonrenieoces.  The  management  of  the  isMiin^  depnrtmeiit  would 
bs  ssmsdiogly  simple.  The  office  of  the  directors  would  he  a  complete  >iiui  ure,  and, 

•  I  wi»h  I  could  hare  made  this  quotation  without  introducing  the  names.    It  would 

-'  -'      •'.'.  ./.r..  -  .11:.  r  tru::. ,.vi,.l    !,•.„!    t<i    th<-   formaiioii   of  an    ia.lepernlent 
,  if  weeoold  ennge  indiscnsiii(>iis  of  this  kind  without  any  reference  t., 
men  who  may  hare  distinguished  themselves  as  either  the  advocates  or  the 
of  the  doctrines  we  investigate. 


The  Bank  Act  of  1844. 

for  any  thing  they  would  have  to  do,  their  places  might  be  as  well  supplied  hy  four- 
and-twenty  broomsticks.  A  few  cashiers  to  exchange  gold  for  notes,  or  notes  for 
gold,  would  be  all  the  establishment  required  ;  and  could  Mr.  Babbage  be  induced  to 
construct  a  'self-acting'  machine  to  perform  these  operations,  the  whole  business  of 
the  currency  department  might  be  carried  on  without  human  agency.  But  the  deposit 
department  would  require  more  attention.  '  It  is  in  the  nature  of  banking  business,' 
says  Mr.  Loyd,  '  that  the  amount  of  its  deposits  should  vary  with  a  variety  of  circum- 
stances ;  and,  as  the  amount  of  deposits  varies,  the  amount  of  that  in  which  those  de- 
posits are  invested  (viz.  the  securities)  must  vary  also.  It  is  therefore  quite  absurd  to 
talk  of  the  bank,  in  its  character  of  a  hanking  concern,  keeping  the  amount  of  its  secu- 
rities invariable.'  As  therefore  the  deposits  might  vary,  the  bank  would  be  a  buyer  or 
a  seller  of  government  securities ;  and,  as  these  variations  are  sometimes  to  a  very 
large  amount,  the  fluctuations  in  the  price  of  the  public  funds  and  of  exchequer  bilk 
would  be  very  considerable.  Thus  the  property  of  those  who  held  these  securities 
would  be  always  changing  in  value.  Again,  the  deposits  would  be  withdrawn  chiefly 
in  seasons  of  pressure,  and  the  bank  would  then  be  compelled  to  sell  her  securities. 
But  suppose  the  scarcity  of  money  should  be  so  great  that  the  securities  would  be  un- 
salable even  at  a  reduced  price,  how  then  could  the  bank  pay  off  her  deposits  1 

"  4.  If  the  currency  were  administered  upon  this  principle,  the  bank  would  be  unable 
to  grant  assistance  to  the  commercial  and  manufacturing  classes  in  seasons  of  ca- 
lamity. 

"  Mr.  Loyd  exclaims,  '  Let  not  the  borrowers  of  money,  government,  and  commerce 
approach,  with  their  dangerous  and  seductive  influences,  the  creator  of  money.'  But 
with  all  deference  to  Mr.  Loyd,  we  contend  that  it  is  the  province  of  a  bank  to  afford 
assistance  to  trade  and  commerce  in  seasons  of  pressure.  Mr.  Loyd,  as  a  practical 
banker,  would  no  doubt  afford  assistance  to  his  own  customers  in  such  seasons ;  and 
if  this  be  the  province  and  duty  of  a  private  banker,  the  duty  is  more  imperative  on  a 
public  banking  company,  and  more  imperative  still  on  a  bank  invested  by  the  legisla- 
ture with  peculiar  privileges  for  the  public  good.  Mr.  Loyd  says,  '  Let  the  bank  afford 
this  assistance  out  of  her  own  funds.'  But,  under  Mr.  Loyd's  system,  she  could  grant 
assistance  only  by  selling  securities ;  and  what  relief  would  she  afford  by  selling  securi- 
ties with  one  hand,  and  lending  out  the  money  with  the  other  t  Besides,  it  is  certain 
that,  under  such  a  pressure  as  Mr.  Loyd's  system  must  occasionally  produce,  these  se- 
curities would  be  salable  at  even  any  price?  'But,'  says  Mr.  Loyd,  'individuals  may 
afford  this  assistance.'  In  seasons  of  pressure  few  individuals  have  more  ample  funds 

than  what  are  necessary  for  the  supply  of  their  own  wants When  the  distress 

is  caused  by  a  contraction  of  the  currency,  it  can  only  be  removed  by  an  increased 
issue  of  notes.  And  there  are  many  cases,  such,  for  instance,  as  that  of  the  Northern 
and  Central  Bank,  in  which  assistance  can  only  be  effectually  rendered  in  this  manner. 

"  We  consider  that  any  system  of  administering  the  currency,  which  prohibits  the 
banking  institutions  of  the  country  from  granting  relief  to  the  commercial  and  manu- 
facturing classes,  must  be  unsound.  We  should  condemn  such  a  system  at  once,  even 
if  we  could  not  detect  the  fallacies  on  which  it  was  founded.  In  political  economy  we 
can  judge  of  principles  only  by  their  practical  effects,  and  any  system  which  produces 
these  effects  must  be  unsound.  When  seasons  of  calamity  occur,  it  is  not  for  the  na 
tional  bank  to  exclaim,  Sauve  qui  peut.  They  ought  to  cooperate  with  the  government 
in  attempting  to  relieve  the  distress,  and  to  preserve  the  tranquillity  of  the  country  " 

These  remarks,  written  in  the  year  1841,  might,  if  put  into  the  past 
tense,  almost  serve  for  a  history  of  the  year  1847.  The  act  of  1844  was 
formed  upon  the  principle  which  is  here  condemned ;  and  the  effects  de- 
scribed have  actually  occurred.  There  have  been  great  fluctuations  in 
the  amount  of  the  circulation,  in  the  rate  of  interest,  and  in  the  prices  of 
the  public  securities.  There  have  been  great  speculations,  followed  by 
great  distress.  The  government  funds  have,  in  large  amounts,  been  un- 
salable ;  and  the  bank  has  been  unable  to  afford  relief  to  the  commercial 
classes.  A  severe  pressure  has  taken  place  ;  and,  in  consequence  of  this 
severe  pressure,  the  act  was  suspended.  It  has  been  denied  that  this 
pressure  was  produced  or  increased  by  the  act.  But  how  stand  the  facts  ? 

63 


.!      /'/      :  •:  -i 

The  act  waa  paaaed,  and,  a*  prcd;.-vd,  n  piv-sui.-  OMMi  !)><•  a.-t  was 
continued,  and  the  preaaure  increased:  tin-  art  was  suspend' •«!,  nn<]  the 
prew>  •  Then  are  not  opinions :  - 

_:   of  Parliament    in   the    latter  end  <•!'  1M7,  (•..mmittres 
were  appointed  by  both  the  House  of  Lords  and  tin-  1 1 

ilotbocaueca  of  the   distress  which  lias   i',,|-  SMIIM-  lime  pre- 
•  I  niniing  the  commercial  clones;  and    how  l'.ir   it   has   \>»-\\   all'i  eted 
"»o  law*  For  regulating  the   issue   id'  hank-notes   payable  on  demand." 
The  following  M  an  extract  from  the  report  of  tin-  Loral1  *  '"inn 
the  came*  of  the  preaturc  :  — 

*  A  sadden  and  unexampled  demand  for  forvL'n  ...:-!•.  pr-..hi.  •  d  b\  a  failure  in  manv 
aeaoriptfosM of  agticalcaral  prodace  throughout  the  l'in;>      •  tn,  coincided  with 

the  unprecedented  extent  ofspeculat  ion  produced  by  increased  facilities  of  credit  and 
•  low  ram  of  inlercm.  and  had  for  conn-  time  occasioned  ..\.-r  ti.rlm/  in  many  in. 
of  commerce.     This  was  more  eepeviallv  felt  in  railroad*,  for  which  calls  to  a  liir^e 
aasaaat  were  daily  becoming;  parable.  « ithont  <  orrcspondm^  fund*  io  im-i>t  iln-m,  ex- 
eept  by  ihe  wuh.lniwal  of  rajutal  from  otln  r  I.IHMHS  an.i  invotnienU.     '1  ! 
accomat  for  much  of  the  preunre  UIV!<T  which  ninny  of  the  weaker  rmnmen  ial  linns 
were  doooiod  to  •ink,  ami  which  was  felt  even  l>y  il,  To  i!i«  -••  cituses  may 

he  added  •  contemponuieoM  rise  of  price  in  eiittmi:  ami.  with  resect  tn  l,<.i:-. 

I  with  the  Kit-t  and  West  India  trade,  a  oudden  and  y\:.-n-.i\.-  tall  in  the  ; 

,  by  which  UM  raluc  of  their  most  readily  uvuiluhlu  i^.-et>  uiul'jr\\eiii  -n  at  >lc]>re- 


are  obvimi>1y  U-ynn<l  the  reach  of  Ir-Mativc  control.  But 
those  which  are  connected  with  tic-  e\tcn>i<>n  of  commercial  ^.<-<  ulatimi,  en- 
C0«raged  or  checked  by  the  facility  or  the  dillienlty  of  obtaining  credit,  by  the  advance 
of  capital  and  the  discount  of  bilU.  the  powers  and  ]><»iti<>n  «f  the  Hank  of  Kit-land 
•Oftat  all  time*  enable  that  corporation  '  •  an  important  inllu  .  <i>m- 

mittee  haTeconse«ni.-n:Iy  felt  it  to  be  their  duty  t<>  iti(|uirc  into  the  cunr>e  )>nrsin-d  by  the 
Uank  acting  under  the  provisions  of  the  7  and  -  .'.  and  they  have  come  to  the 

coadosioQ  that  the  recent  panic  was  materially  aggravated  by  the  I.JH  -ration  oftliat 
statate,  and  by  the  proceedings  of  the  bank  itself  'II..-  cib-<  t  inay  b<-  f...  .  d.  directly. 
to  the  act  of  1  844,  in  the  legislative  restriction  imposed  on  the  means  of  accumniixhi- 
tion,  whilst  a  large  amount  of  bullion  was  held  in  the  coffers  of  the  bank,  and  during  a 
time  of  favorable  exchangee;  and  it  may  be  traced  to  the  same  cause,  indirectly,  as  a 
CDBseaaence  of  great  fluctuations  in  the  rate  of  discount,  and  of  capital  previously  ad- 
vanced at  an  unusually  low  rate  of  interest.  This  «>ur>c  the  bank  would  hardly  ha\-- 
Mt  iuelf  justified  in  taking,  had  not  an  impression  exi-ted  that,  by  the  separation  of 
the  SWM  and  the 


banking  departments,  one  indexible,  rule  for  reu'iilatinj  the  bank 
had  been  snbstitated  by  law  in  place  of-  the  discretion  formerly  vested  in  the 

The  nature  and  extent  of  tho  pn-sMire  i>  thus  des<Til>ed  by  the  Gov- 
ernor and  Deputy-Governor  of  the  Hank  of  Knpland  :  — 

"  The  panic  began  by  the  fmlures  in  the  corn  trade.  The  prie-  of  wheat  had  risen 
to  about  IM*.  Large  arrivals  of  prain  from  the  continent  of  Kurope  and  from  Amer- 
ica, coupled  with  the  prospect  of  an  early  and  abundant  harvest,  caused  n  sudden  fall 
in  price  to  about  60«.,  with  a  corrc-p'/Tidm;;  decline  in  Indian  com.  The  failure  of 
moat  of  the  corn  speculators  followed  this  great  reduction  in  price,  and  their  failure 
earned  the  stoppage  of  an  eminent  di-connt  broker  having  a  lar-ji-  country  connection. 
Tab  latter  failure,  by  closing  one  of  the  principal  chann  -i  tlio, 

eoMtrr  aad  London,  caused  distrust  to  extend  into  the  country.  Credit  became  af- 
Cecied  by  these  fiuiarM,  and  several  Ix.ndon  firms  of  high  stand  in-  a!-,,  fail,  d  Then 
followed  in  rapid  suoceasion  the  failure  of  the  Koval  Hank  of  Liverpool,  tin-  Liverpool 
Banking  Company,  the  North  and  South  Wales  Hankin-  Company,  some  privat- 
•oaalii  banks,  ana  the  Union  Bank  of  Newcastle,  followed  by  a  tremendous  run  upon 

'•  •!!':;          .    ii     •       tBaak        To  :!:.--••  .'.i-:i-t.  r-  -uci  i-c.ji  •!  alarm. 

aad  aa  atasOM  lOUl  prostration  of  credit  ;.,n  bankers  and  discount  brokers 

64 


The  Bank  Act  of  1844. 

refused  to  grant  the  usual  accommodation  to  their  customers,  and  necessarily  obliged 
every  one  requiring  assistance  to  resort  to  the  Bank  of  England.  Money  was  hoarded 
to  a  considerable  extent;  so  much  so,  that  notwithstanding  the  notes  and  coin  issued 
to  the  public  in  October  exceeded  by  £4,000,000  or  £5,000,000  the  amount  with  the 
public  in  August,  still  the  general  complaint  was  of  a  scarcity  of  money.  Credit  was 
so  entirely  destroyed,  that  houses  trading  to  distant  countries  carrying  on  their  busi- 
ness through  the  means  of  credit,  by  a  renewal  of  their  acceptances  as  they  became 
due,  were  no  longer  able  to  meet  their  engagements,  and  were  forced  to  stop  payment- 
This  was  the  state  of  things  previous  to  the  issuing  of  the  government  letter  in 
October."  (Lords,  No.  12.) 

The  Committee  of  the  House  of  Commons  delivered  a  report  in  favor 
of  the  continuance  of  the  bill  without  alteration,  in  opposition  to  the  opin- 
ions of  by  far  the  majority  of  the  witnesses  who  were  examined. 

Those  witnesses  who  are  friendly  to  the  act  contend  that  it  has  se- 
cured the  convertibility  of  the  Bank  of  England  note,  —  that  this  conver- 
tibility was  endangered  in  1825,  in  1837,  and  in  1839,  and  would  have 
been  endangered  in  1847  but  for  this  act.  (See  the  Evidence  before  the 
Committee  of  the  House  of  Lords,  Questions  Nos.  1406  to  1409,  and 
No.  3169.) 

By  the  phrase  "  securing  the  convertibility  of  the  note  "  it  is  not  meant 
that  the  issue  department  of  the  Bank  of  England  held  a  sufficient  amount 
of  gold  and  silver  to  pay  off  all  the  notes  it  had  issued.  It  is  obvious  that 
the  gold  and  silver  in  hand  must  always  be  fourteen  millions  less  than  this 
amount,  inasmuch  as  fourteen  millions  of  notes  are  issued  against  securi- 
ties. By  "  securing  the  convertibility  of  the  note "  is  meant,  that  the 
issue  department  of  the  Bank  of  England  was  in  a  condition  to  pay  off 
any  amount  of  notes  of  which  payment  was  likely  to  be  demanded  for  the 
purpose  of  exporting  the  gold  ;  the  issue  department  was  always  in  a  con- 
dition to  meet  any  foreign  demand  for  gold.  This  is  called  "  securing 
the  convertibility  of  the  note." 

It  has  been  contended,  that  the  act  has  retained  in  the  vaults  of  the 
Bank  of  England  a  larger  amount  of  gold  and  silver  than  would  otherwise 
have  been  retained.  And  as  this  amount  is  set  apart  for  the  express  pur- 
pose of  paying  the  notes,  their  payment  is  so  far  additionally  secured. 
On  the  other  hand,  it  has  been  maintained  that,  by  thus  reserving  all  the 
gold  to  pay  the  notes,  we  endangered  the  payment  of  the  deposits.  And 
had  the  banking  department  stopped  payment,  a  domestic  run  would  have 
taken  place  upon  the  issuing  department,  and  thus  the  payment  of  the 
notes  would  still  have  been  endangered. 

The  following  is  the  evidence  of  a  director  of  the  Bank  of  Liverpool 
upon  the  subject :  — 

"  With  regard  to  securing  the  convertibility  of  the  notes,  what  is  your  opinion  of  the 
bill? 

"  I  do  not  think  it  has  secured  the  convertibility  of  the  notes  at  all.  The  notes  re- 
mained convertible  up  to  the  suspension  of  the  bill ;  but  I  believe  that  if  the  bill  had 
not  been  suspended  then,  or  some  similar  measure  adopted,  notes  would  have  ceased 
to  be  convertible.  Looking  to  the  general  state  of  things  throughout  the  country,  and 
to  what  I  know  to  have  been  the  state  of  things  in  London,  and  the  position  of  trade 
generally, —  to  the  alarm  that  was  spreading  rapidly  through  the  country,  and  to  the 
iact  that  the  power  of  the  bank  had  bcun  reduced  to  such  a  point,  that  if  there  had 
Deen  any  apprehension  of  the  failure  of  the  country  banks,  it  could  not  further  support 
them,  and  that  very  little  might  have  occasioned  (I  might  perhaps  go  further,  and  say, 
F*  65 


A  Treat itf  on  Banking. 
id)  the  feilnre  of  bank*  in  larpe  town*  and  in  the  country ;  belier- 


Is* *J»lifoneortwoc<Mintry  banks  of  any  magnitude  hud  fail,. I.  al.-inn  would  have 

one  or  two  London  i.ank*  I..-..I  •  . rim- 


would  hare  been  general ;  ssrinf,  also,  the  coii-id.-rai.l.-  amount  of  n-,  r  <•  in  th.- 
hand*  of  the  covntry  bankers  and  joint-stock  banks,  and  tin-  u-  >.-.*\:\  that  th.  i.-  would 
hare  h*rn  </ baring  that  reserre  as  early  as  possible  converted  into  ^old  if  tin-  Lank 
wMofciiftd  to  amp;  seeing  that  a  rattnro  sfJE  10,000  for  <-a<  Ii  <>f  thr<-<-  hundn-'l  .  ..un- 
uy  banks  woaM  nave  taken  six  or  seven  millions,  or  ot  .t  ir.  IMIH  ,.:il-i,  «,,n  ,i  ),.!\.- 
taken  ircntiluons;  and  that  if  the  ran  for  gold  had  onoe  be^un,  it  would  proKahly 
have  COM  oa  till  tbsj  IIDHSlin  Win  llliiin  '  ><••  -inp  all  thi-.  my  linn  opinion  iv  that 
the  bio  of  1§44  nas  BOt  Mcnnd  ronvertibilitv,  and  I  state  the  ^rounds  on  which  that 

M.) 


It  seems  useless  at  present  to  speculate  upon  such  a  state  of  things,  OB 
we  nor  know  that  before  the  pressure  arrived  to  such  a  hciirlit  ;is  to  c;ius<- 
the  banking  department  to  stop  payment,  the  net  would  IK*  suspi  m!r<|. 
Hut  it  seems  fair  to  ask,  whether  the  precautions  of  the  act  are  not  dispro- 
portionate to  the  danger?  We  ought  to  consider  not  merely  the  ^reat- 
neas  of  the  evil,  but  also  the  probability  of  its  occurrence  ;  and  is  it  wise 
to  inflict  upon  ourselves  a  vast  number  of  serious  evils  merely  to  guard 
against  a  danger  that  may  never  occur  ?  It  may  further  be  asked,  w  lieth- 
ic  stringent  measures  that  were  necessary  last  year  to  keep  the  hank- 
ing department  from  stopping  payment,  would  not  have  been  equally  ef- 
fectual under  the  previous  state  of  the  law  in  preserving  the  convertibility 
of  the  notes? 

It  should  be  recollected,  too,  that  previous  to  the  passing  of  the  act  of 
1844,  the  bank  had  the  power  of  rectifying  the  exchanges  by  means  of 
foreign  credits,  as  they  did  in  the  year  1839.  (Several  of  the  witnesses 
made  suggestions  for  rectifying  this  exchange  l.y  utlier  means  than  the 
exportation  of  gold.  See  Commons,  97,  201N.  'jol':*.  W79,  2614,  'Jii'JO.) 
Hut  the  directors,  being  now  relieved  from  all  responsibility  with  regard  to 
the  issue  department,  have  no  inducement  to  engage  in  such  an  operation. 
Indeed,  they  might  be  censured  for  interfering  with  the  principle  of  the 
act,  that  the  exchanges  shall  be  rectified  by  a  transmission  of  gold  and 
silver. 

It  would  appear  from  the  evidence,  that  the  sole  advantage  now  claimed 
for  the  act  is,  that  it  has  secured  the  convertibility  of  the  note.  Other  ad- 
vantages, however,  were  expected  to  result  Those  expectations  are  thus 
disposed  of  in  the  report  of  the  Lords'  committee  :  — 

-  It  i*  tree  that  to  thorn  who  may  have  expected  that  the  7  and  8  Viet.  c.  32,  would 
HTifctuaJly  prevent  a  recurrence  of  cycles  of  commercial  excitement  and  depression, 
the  contrast  between  the  yean  1845  and  1847  must  produce  a  grievous  disappoint- 
To  those  who  anticipated  that  the  act  would  put  a  check  on  improvident 
pointment  cannot  be  less,  if  reliance  is  to  be  placed  (as  the  com- 
:  may)  on  the  statement  of  the  governor  of  the  hank,  and  of  other 
that  'speculations  were  never  carrixl  to  MX  h  an  enormous  extent  as  in 


I84«  s*d  !••  bugMnriag  of  1847.'  If  the  act  were  relied  on  as  a  security  against  vio- 
lent flnetvatioos  in  the  Talne  of  money,  the  fallaciousness  of  such  anticipation  is  con- 
etaivdr  proved  by  the  fact,  that  whilst  the  difference  1*  tween  the  highest  and  lowest 
rate  of  diseoaat  WM  in  the  calamitous  yean  1837  and  1839  hut  2j  to  :H  !"'r  c,-nt  .  th<- 
dMbrence  in  1847  roae  to  6J.  If  it  was  contemplated  that  the  numlicrand  the  exti-m  of 
coouBcrasJ  failures  would  have  been  lessened,  the  deplorable  narrative  of  the  governor 
of  the  bank,  recording  the  failure  of  thirty-three  houses  comparatively  in  lur^i-  Im-i- 
aes*,  in  London  •kme,  to  the  amount  of  £ 8,129,000  is  a  conclu-:  !i  the 

66 


The  Bank  Act  of  1844. 

enormous  extent  to  which  railroad  speculation  has  been  carried  be  considered  as  an 
evil  to  which  a  sound  system  of  banking  could  have  applied  a  corrective,  such  a  cor- 
rective has  not  been  found  in  an  act,  since  the  passing  of  which,  during  a  period  of 
three  years,  an  increased  railway  capital  of  upwards  ofj£  22 1,000,000  has  been  author- 
ized to  be  raised  by  Parliament ;  and  when  the  enormous  sum  of  £  76,390,000  is  stated, 
on  high  financial  authority,  to  have  been  actually  expended  on  railways  in  two  years 
and  a  half.  If  the  power  of  obtaining  banking  accommodation  on  moderate  terms 
were  considered  to  be  promoted  by  the  act  of  1844,  it  cannot  be  said  that  this  im- 
portant object  has  been  attained,  since  it  appears  in  evidence  that  in  1847,  in  addition 
to  an  interest  of  9  or  10  per  cent.,  a  commission  was  also  frequently  paid,  raising  the 
charge  to  10,  20,  or  30  per  cent.,  according  to  the  time  which  bills  had  to  run." 

The  report  might  have  added,  that  if  it  was  expected  that  the  amount 
of  notes  in  the  hands  of  the  public  would  fluctuate  in  exact  correspon- 
dence with  the  fluctuations  in  the  amount  of  gold  in  the  Bank  of  England, 
that  expectation  has  not  been  fulfilled.  From  the  censure  cast  on  the 
Bank  of  England,  before  the  act  was  passed,  for  not  producing  this  cor- 
respondence, it  may  be  inferred  that  such  an  expectation  was  entertained. 
(Evidence  taken  before  the  Committee  on  Banks  of  Issue,  Nos.  2677, 
2713.) 

Those  who  are  opposed  to  the  act  of  1844  bring  against  it  the  following 
accusations :  — 

First-  The  Act  of  1844  is  accused  of  having  produced  an  abundance 
of  money  and  a  low  rate  of  interest,  and  thus  stimulated  to  excessive  spec- 
ulation. We  showed,  in  the  last  section,  that  these  are  always  the  precur- 
sors of  a  pressure. 

According  to  this  Act,  all  persons  are  entitled  to  demand  from  the  issue 
department  of  the  Bank  of  England,  Bank  of  England  notes  in  exchange 
for  gold  bullion  at  the  rate  of  £3  17s.  9d.  per  ounce  of  standard  gold. 
When,  therefore,  the  foreign  exchanges  are  favorable  to  the  importation 
of  gold,  this  gold,  consisting  of  gold  bars  and  foreign  gold  coin,  which 
could  not  be  used  as  money  in  this  country,  is  taken  to  the  issue  depart- 
ment, and  instantly  converted  into  Bank  of  England  notes.  The  amount 
of  notes  is  thus  increased  beyond  what  the  transactions  of  the  country  re- 
quire. Money  becomes  plentiful,  the  rate  of  interest  falls,  and  the  low 
rate  of  interest  gives  facilities  to  speculative  undertakings. 

It  must  be  acknowledged  that,  previous  to  the  passing  of  this  act,  the 
bank  directors  had  adopted  the  principle  of  purchasing  all  foreign  gold 
that  might  be  offered  them  at  £  3  17s.  9d.  an  ounce  ;  and  it  formed  a  fea- 
ture of  their  system  of  management,  as  explained  before  a  committee  of 
the  House  of  Commons  in  the  year  1832.  When  the  advocates  of  the 
act  say  that  it  is  only  during  a  season  of  pressure  that  the  act  comes  into 
operation  (Commons,  5121),  they  can  mean  only  that  it  is  during  such  a 
season  that  the  system  established  by  the  act  differs  from  the  system  pre- 
viously in  existence.  The  act  is  as  much  in  operation  when  it  gives  out 
notes  as  when  it  gives  out  gold. 

It  must  also  be  acknowledged  that  on  the  31st  August,  1844,  when 
the  act  came  into  operation,  there  was  a  large  amount  of  gold  in  the  bank, 
and  a  low  rate  of  interest  consequently  prevailed.  This  gold  had  accu- 
mulated, not  literally  in  consequence  of  the  act,  but  in  consequence  of  the 
principle  embodied  in  the  act.  From  the  adoption  of  this  principle,  the 

67 


•old  in  ihe  vaults  of  the  bank  still  further  increased  aft.  r  tli«-  passing  of 

It  must  I-  acknowledge*!,  that  although  tin-  act  rv<|u,: 

•sue  department  at  all  time*  to  issue  notes  against  L">!d,  it  dues  n<>t  require 
that  the  Bank  of  England  shall  at  all  time*  issue  I  1  i.ooo.ntxi  ;r.;unst 
wvuritir*.     The  act   merely   requires  tliat   the   amount   skull  nut    exceed 
.1*  1-1,000,000.      And  a  I«««ndt'ii   hanker   wlm   u.i^   <  \amiM-  d   a- 
before  the  Lords1  Committee,  mid  I.--  •  'hat  when  the  act  I-.-HIM- 

operation,  the  bank  would  nut  issue  at  lii-st  more  tlian  £  11.000.000 
•gainst  securities,  and  that  the  remaining  .£11,000,000  would  not  In-  issued 
until  the  rate  of  interest  had  advanced  to  three  and  a  half  or  four  per  • 
Hut  the  act  did  not  require  the  Hank  of  England  to  adopt  this  course  ;  and 
it*  adoption  would  pn.liahly  have  been  considered  by  some   j 
departure  from  its  principle.      I 'or  it  is  n  fundamental  principle  of  the  act, 
that  the  amount  of  the  circulation  shall  jerk  up  and  down  in  evict  cou- 
nty to  the  importations  or  exportations  of  p>ld.     And  hence  during 
a  favorable  course  of  exchange,  money  must  be  abundant,  and  interest 
must  be  low. 

It  is  alleged  that  the  act  still  further  reduced  the  rate  of  inter* 
promoted  speculative  undertakings,  by  placing  the  Hank  of  England  in  n 
position  in  which  the  directors  were  led  to  adopt  a  new  system  of  man- 
agement 

In  September,  18-44,  soon  after  the  act  was  passed,  the  directors,  whose 
rate  of  interest  had  never  previously  been  lower  than  four  per  cent.,  re- 
duced it  to  two  and  a  half  per  cent.  The  object  of  this  reduction  was  to 
invest  a  larger  portion  of  their  funds  in  the  discount  of  bills.  It  stated 
that,  to  effect  this  object,  the  directors  not  only  reduced  their  rate  of  dis- 
count, but  also  canvassed  for  business,  and  thus  <rave  ;i  stimulus  to  new 
transactions.  They  had  been  told  that  the  banking  department  of  the 
Bank  of  England  was  to  be  managed  "  like  any  other  banking  concern 
wing  Bank  of  England  notes."  And  it  is  not  an  unusual  tiling  for  bank- 
en,  when  they  cannot  employ  their  funds  at  so  high  a  rate  of  interest  as 
they  wish  to  obtain,  to  employ  them  at  a  lower  rate.  Nor  is  it  unusual 
for  a  banker  to  offer  his  surplus  cash  to  bill-brokers  and  others,  who  are 
known  to  be  in  the  habit  of  supplying  bankers  with  bills.  But  however 
coniirtcnt  the  conduct  of  the  directors  may  have  been  with  banking  prin- 
ciples, the  reduction  of  the  bank  rate  of  discount  immediately  caused  a 
reduction  in  the  market  rate,  and  in  the  rates  charged  by  hankers  through- 
out the  country.  For  it  must  be  observed,  that  when  the  bank  lowers  her 
rate  of  interest  upon  money  in  seasons  of  abundance,  it  has  the  : 
effect  of  reducing  the  market  rate  of  interest  still  lower  than  the  hank 
rale.  Suppose,  for  instance,  the  bank  discounts  at  five  per  cent.,  and  the 
market  rate  of  discount  is  four  per  cent.,  of  course  no  bills  are  offered  for 
discount  to  the  bank.  Then  the  bank,  to  get  discounts,  lowers  her  rate  of 
internal  to  four  per  cent  A  portion  of  bills  that  were  previously  dis- 
counted by  private  bankers  and  bill-brokers  will  then  l>e  taken  to  the 
bank  ;  but  the  notes  thus  drawn  from  the  bank  make  money  still  more 
plentiful,  and  the  market  rate  falls  to  three  and  a  half  or  three  p.  r  cent. 
Now,  should  the  bank  reduce  her  rate  to  three  per  cent,  tl  • 

CH 


The  Bank  Act  of  1844. 

would  again  follow.  For  the  additional  notes  thus  drawn  out  would  make 
money  so  abundant  as  to  reduce  the  market  rate  of  interest  to  two  and  a 
half  or  two  per  cent.,  and  so  on. 

But  in  seasons  of  scarcity,  precisely  the  opposite  effect  follows.  For  when 
the  bank  raises  the  rate  of  discount,  it  has  the  effect  of  raising  the  market 
rate  still  higher.  Thus,  if  the  bank  should  be  discounting  at  5  per  cent., 
and  the  market  rate  should  be  5  4  per  cent.,  let  the  bank  raise  her  rate  to 
6  per  cent.,  and  the  market  rate  will  immediately  become  7  or  perhaps  8 
per  cent.,  or  even  higher  upon  inferior  bills.  For  the  bank  rate  of  discount 
will  be  the  market  rate  for  only  the  first  class  of  bills,  —  such  bills  as 
could  be  discounted  at  the  bank  ;  and  all  bills  of  the  second  class  will 
have  to  pay  an  advanced  rate,  and  those  of  a  still  more  inferior  character 
will  not  be  discountable  at  all. 

In  1844  the  rate  of  discount  was  lower  than  in  any  previous  season  of 
abundance  of  money.  This  low  rate  of  interest  was  produced,  in  the  first 
place,  by  the  principle  of  the  act  of  1844,  which  caused  the  issue  of  a 
large  amount  of  notes  against  gold  and  silver  bullion  ;  and,  secondly,  by 
that  provision  of  the  act  which  separated  the  two  departments,  and  thus 
brought  the  banking  department  of  the  Bank  of  England  into  competition 
with  other  bankers  and  money  dealers,  as  discounters  of  bills.  (Com- 
mons, 2275,  5189,  5347-5350.)  The  directors  of  the  bank  seem  to 
think  that  the  spirit  of  the  act  of  1844  required  that  the  bank  should  em- 
ploy its  reserve. 

"  If  we  keep  the  notes  in  the  reserve,  instead  of  giving  them  out  to  the  public,  the 
effect  that  ought  to  be  produced  by  gold  coming  into  the  country  is  counteracted ;  it 
induces  a  larger  amount  of  capital  to  come  into  the  country,  because  you  do  not  allow 
that  portion  which  has  come  in  to  be  employed.  If  you  do  not  put  out  the  gold,  or 
the  representative  of  gold,  you  entirely  prevent  its  having  any  effect  upon  the  circula- 
tion. The  exchange  will  be  kept  up,  and  gold  will  continue  to  come  in."  (Com- 
mons, 3009.) 

Thus  it  appears  that,  although  there  is  no  positive  enactment  in  the  act 
respecting  the  management  of  the  banking  department,  the  directors  so 
understand  its  spirit  as  to  believe  that  when  gold  is  going  out  of  the  coun- 
try they  ought  to  take  measures  to  prevent  its  exit ;  and  when  gold  is 
coming  into  the  country,  they  ought  to  endeavour  to  drive  it  back  again. 
The  first  object  is  attained  by  raising  the  rate  of  interest  very  high  ;  the 
second,  by  reducing  it  very  low.  It  must,  however,  be  acknowledged, 
that,  apart  from  any  efforts  of  the  banking  department,  a  large  impor- 
tation of  gold  will  under  the  act  necessarily  cause  a  low  rate  of  interest 

Secondly.  The  next  charge  against  the  act  of  1844  is,  that  it  does  not 
admit  of  those  occasional  expansions  of  the  amount  of  notes  in  circulation 
which  are  often  required  by  the  domestic  transactions  of  the  country. 

It  is  alleged  that  one  imperfection  of  the  act  was  strikingly  manifested 
in  the  beginning  of  the  year  1846.  The  Parliament  required  that  all  rail- 
way companies  that  intended  to  apply  for  an  act  should  lodge  ten  per  cent, 
on  their  capital  within  fifteen  days  after  the  meeting  of  Parliament.  It 
was  impossible  to  say  beforehand  what  amount  of  notes  would  be  required 
to  make  these  payments.  It  was  variously  estimated  at  from  £  12,000,000 
to  £  25,000,000,  while  all  the  notes  in  the  hands  of  the  public  amounted  to 

69 


A   Trtatite  on  Banking. 

only  about  £  30,000,000.  Ultimotely  the  railway  companies  of  Ireland  and 
.Scotland  were  allowed  to  make  their  pn\m«-nts  m  DuMiu  and  Edinburgh, 
reapectivcly ;  and  the  payments  in  Ixmdon  did  not  amount  to  inmc  than 
,£14,000,000.  (Lord*,  1209,  1211.)  This  large  sum  was  paid  by 
f^jf^n*  of  the  banking  department  of  the  Bank  of  England  lending  out  the 
money  as  Cut  as  it  was  received.  Had  the  act  of  1844  not  been  in  •  \i>t- 
eoee,  the  Bank  of  England  (as  in  the  case  of  the  West  India  loan,  and  of 
previous  loans)  might  have  lent  out  the  money  before  the  time  of  pavim -nt 
arrived,  and  no  apprehensions  would  have  been  entertained.  The  notes 
in  circulation  would  have  been  largely  increased  for  a  few  days,  and  then 
again  have  subsided  to  the  former  amount  As  it  was,  the  payment  was 
not  made  through  any  virtue  in  the  act.  And  had  it  been  required  under 
different  circumstances,  or  when  the  banking  department  had  a  smaller 
reserve,  it  could  not  have  been  made  at  all.  (Lords,  1209.) 

It  is  further  alleged,  that  the  act  of  l-ll  ivquin's  an  immediate  con- 
traction in  the  amount  of  the  notes  whenever  gold  is  exported  for  merely 
a  temporary  or  specific  purpose.  Between  March  13  and  April  24, 1847, 
.£2,237,200  was  exported  in  payments  for  corn.  An  equal  amount  of 
notes  was  of  course  cancelled  by  the  issue  department.  These  notes 
must  have  been  taken  out  of  the  hands  of  the  public,  or  from  the  banking 
department  of  the  Bank  of  England.  About  the  same  time,  the  govern- 
ment had  occasion  to  borrow  of  the  banking  department  about  £  3,500,000 
to  pay  the  April  dividends.  The  banking  department,  consequently,  for 
a  while  limited  their  discounts,  and  even  refused  to  grant  loans  on  ex- 
chequer bills.  Great  pressure  was  consequently  felt,  though  it  did  not 
last  for  a  long  time.  Now  it  is  alleged,  that  if  the  act  of  1844  had  not 
existed,  the  directors  would  have  allowed  the  gold  to  be  exported  without 
immediately  contracting  the  notes  in  circulation.  They  would  have  lent 
the  money  required  by  the  government,  without  refusing  the  loans  and 
discounts  to  the  public ;  and  the  contraction  of  the  circulation,  by  being 
extended  over  one  or  two  months,  instead  of  a  few  weeks,  might  have 
produced  no  inconvenience. 

By  the  act  of  1844,  the  circulation  of  the  country  banks  was  restricted 
to  a  certain  amount  The  average  of  the  twelve  weeks  ending  the  27th 
of  April,  1844,  was  fixed  for  the  maximum.  During  some  months  in  the 
year  the  country  requires  more  notes  than  this  maximum ;  and,  as  the 
banks  can  issue  no  more  notes  of  their  own,  they  obtain  Bank  of  England 
notes  from  London.  In  the  year  1845  acts  of  Parliament  were  passed  for 
the  regulation  of  the  notes  issued  in  Scotland  and  Ireland.  Beyond  cer- 
tain fixed  amounts  the  banks  in  these  countries  are  required  to  hold  gold 
equal  to  the  amount  of  notes  in  circulation.  In  both  countries  this  circu- 
lation fluctuates.  In  Scotland,  the  highest  amount  is  in  November.  In 
Ireland,  the  highest  amount  is  in  January  or  February.  In  these  months 
«hey  require  more  gold,  and  this  gold  they  obtain  from  the  issue  depart- 
ment in  exchange  tor  Bank  of  England  notes.  Before  the  act  of  1844, 
the  circulation  of  the  country  parts  of  England,  of  Scotland,  and  of  Ire- 
land, expanded  or  contracted  as  required  by  the  wants  of  the  public, 
without  affecting  the  London  circulation  of  the  Bank  of  England  ;  but 
under  this  act  the  expansion  of  the  circulation  of -the  country  bunks,  the 

/  \* 


The  Bank  Act  of  1844. 

banks  of  Scotland  and  of  Ireland;  are  attended  by  a  contraction  of  the  cir- 
culation of  Bank  of  England  notes  in  London.  This  may  not  be  a  matter 
of  much  consequence  in  ordinary  times,  when  the  banking  department  of 
the  Bank  of  England  has  a  large  reserve  ;  but  in  seasons  of  pressure,  such 
as  occurred  in  1847,  this  drain  on  the  London  circulation  may  be  more 
severely  felt. 

It  may  be  further  stated,  that  the  withdrawal  or  discontinuance  of  a 
certain  amount  of  bills  of  exchange,  through  loss  of  credit  or  otherwise, 
would  render  a  larger  amount  of  bank-notes  necessary  to  fill  up  the  space 
formerly  occupied  by  those  bills  of  exchange.  But  for  such  a  circum- 
stance no  provision  is  made  by  the  act.  (Lords,  232-235.) 

Thirdly.  It  is  alleged  that  the  act  of  1844  tends  to  produce  and  to  ag- 
gravate pressure,  and  at  the  same  time  deprives  the  Bank  of  England  of 
the  power  of  granting  adequate  assistance,  even  when  the  pressure  is  most 
urgent,  and  when  assistance  can  be  rendered  without  any  danger  of  af- 
fecting the  foreign  exchanges. 

This  objection  assumes  that  a  pressure  is  an  evil.  It  assumes,  that,  to 
advance  the  rate  of  interest  to  a  rate  which  no  profit  can  afford  to  pay  ;  to 
deprive  solvent  houses  of  the  means  of  meeting  their  legitimate  engage- 
ments ;  to  cause  a  universal  reduction  of  prices,  and  thus  to  baffle  the  cal- 
culations of  even  the  most  prudent ;  to  reduce  wealthy  merchants  to  the 
condition  of  paupers  ;  to  deprive  manufacturers  of  the  means  of  executing 
their  orders,  and  thus  to  throw  thousands  of  industrious  people  out  of  em- 
ployment ;  to  sell  to  foreigners  large  amounts  of  goods  and  manufactures 
at  less  than  the  prime  cost,  thus  causing  a  great  national  loss ;  to  paralyze 
the  national  industry  ;  to  stop  the  progress  of  useful  works,  and  to  destroy 
confidence  and  credit,  —  the  objection  assumes,  that  a  pressure  which  pro- 
duces effects  like  these  is  a  national  evil.  And  such  must  be  the  opinion 
of  those  who  suspended  the  act,  and  of  those  who  approve  of  that  suspen- 
sion ;  for  it  was  to  prevent  or  to  remove  evils  like  these  that  the  act  was 
suspended. 

It  is  alleged  that  the  act  tends  to  produce  such  pressures.  By  issuing 
notes  against  all  the  importations  of  gold,  it  causes  abundance  of  money, 
lowers  the  rate  of  interest,  and  stimulates  to  speculative  undertaking  (thus 
the  low  rate  of  interest  in  1844  and  1845  stimulated  the  railway  specu- 
lations), and  then,  speculation  is  always  succeeded  by  pressure.  If, 
therefore,  similar  causes  produce  similar  effects,  and  if  the  future  shall 
resemble  the  past,  the  operation  of  the  act  of  1844  will  tend  to  produce 
pressure. 

It  is  further  alleged,  that  when  a  pressure  occurs  without  being  pro- 
duced by  the  act,  then  the  act  tends  to  aggravate  the  pressure.  An  un- 
favorable course  of  the  exchange  may  be  produced  by  a  large  importation 
of  corn.  The  act  requires  that  the  exchange  shall  be  rectified  by  an  ex- 
portation of  gold,  and  that  this  exportation  of  gold  shall  be  attended  by  a 
contraction  of  the  domestic  circulation  (according  to  the  present  meaning 
of  the  word  circulation)  to  an  equal  amount.  It  is  hardly  necessary  to 
show  that  these  regulations  must  aggravate  a  pressure. 

It  has  been  said,  that  the  pressure  of  1847  was  produced  by  the  railway 
speculations  and  the  famine,  and  therefore  it  was  not  produced  or  in- 

71   ' 


A   Treatuf  on  Banting. 

by  the  act  of  1844.  We  do  not  |x-iv« -iv«»  the  soundness  of  this 
ling,  and  it  Meant  to  show  a  forgrtfulness  of  the  peculiar  operation 
of  the  act  The  act  requires  thnt  the  amount  of  notes  m  circulation  sliall 
fluctuate  in  exact  accordance  with  thr  amount  <>f  bullion.  Railway  *\»  <•• 
ulationa,  famine,  foreign  loans,  or  a  hundred  other  things,  may  turn  the 
foreign  exchanges,  ana  cause  gold  to  be  exported,  but  it  in  the  act  \\  hi.-h 
causes  our  circulation  of  notes  to  be  contracted  in  proportion  as  the  <jo!d 
is  withdrawn.  So  a  hundred  different  circumstances  may  cause  gold  to 
be  imported,  but  it  is  the  act  which  causes  the  circulation  to  )><•  mtlateil  in 
ruriosnondoocici  with  thin  incrrased  amount  of  gold.  Herein.  \\<-  think,  is 
the  injurious  operation  of  the  act.  When  the  exchanges  are  favorable, 
gold  is  imported.  The  gold  is  in  bars  and  foreign  coin,  and  could  not 
pass  as  money.  But  the  act  issues  notes  against  this  gold,  thus  increasing 
the  circulation,  lowering  the  rate  of  interest,  and  giving  rise  to  speculations 
of  all  kinds.  These  speculations,  cooperating  possibly  with  other  causes, 
turn  the  exchanges.  Notes  are  then  taken  to  the  bunk,  and  gold  demand- 
ed, for  the  purpose  of  being  exported.  This  contraction  of  the  circulation 
of  notes  produces  pressure,  and  the  apprehension  of  further  pressure  pro- 
duces panic. 

They  who  contend  that  the  act  of  1844  has  not  "  in  the  slightest  degree 
tended  either  to  create  or  to  increase  the  pressure"  (Lords,  3106)  of 
1647,  seem  to  be  inconsistent  in  contending,  at  the  same  time,  that  the 
act  has  preserved  the  convertibility  of  the  bank-note.  It  was  the  pressure 
and  the  high  rate  of  interest,  and  low  prices  consequent  upon  the  pressure, 
that  checked  the  efflux  of  gold,  and  turned  the  exchanges.  Now,  if  the 
act  had  no  effect  in  producing  or  increasing  that  pressure,  the  converti- 
bility of  the  note,  by  whatever  causes  it  was  secured,  was  not  secured  by 
the  act.  If  the  act  did  not  in  the  slightest  degree  either  create  or  increase 
the  pressure,  in  what  way,  we  ask,  could  it  preserve  the  convertibility  of 
the  note  ?  It  appears  to  us  that  those  who  contend  that  the  act  preserved 
the  convertibility  of  the  note  are  bound  by  consistency  to  admit  that  the  act 
produced  or  increased  the  pressure. 

It  is  further  alleged,  that  the  act  aggravates  a  pressure  by  the  u  panic  " 
which  it  creates.  It  is  stated  that,  during  the  pressure  of  1847,  notes  to 
the  amount  of  £  4,000,000  were  hoarded  under  the  influence  of  panic, 
and  this  hoarding  was  occasioned  by  the  provisions  of  the  act.  It  must  be 
acknowledged,  however,  that  something  of  this  kind  has  taken  place  in 
former  pressures.  We  noticed  this  circumstance  with  reference  to  the 
pressure  of  1836  (The  History  of  Banking  in  America,  by  J.  W.  (Jil- 
hart,  page  96),  and  again  with  reference  to  the  pressure  of  1839  (An 
Inquiry  into  tke  Cause*  of  the  Pressure  on  the  Money  Market  in  the  Year 
1699,  by  J.  W.  Gilbert,  page  38). 

**  A  contraction  of  the  circulation  leads  to  a  general  apprehension  of 
danger.  Hence  the  bankers  and  others  keep  larger  reserves  of  bank-notes 
on  hand,  in  order  to  be  prepared  for  the  worst,  and  thus  the  evils  of  the 
contraction  are  considerably  increased.  '  That  portion  of  the  notes  of  the 
Bank  of  England  which  is  passing  from  hand  to  hand,  may  be  called  the 
active  circulation.  That  portion  which  is  hoarded,  or  kept  in  reserve  to 
demands,  may  be  called  the  dead  circulation.  Now,  it  is 


The  Bank  Act  of  1844. 

quite  certain  that  the  dead  circulation,  while  it  remains  in  that  state,  has 
no  effect  upon  the  prices  of  commodities,  the  spirit  of  speculation,  or 
the  foreign  exchanges.  These  are  affected  only  by  the  active  circulation. 
In  seasons  of  pressure  the  dead  circulation  is  increased  at  the  expense  of 
the  active  circulation,  because  people  hoard  their  money  to  meet  contin- 
gencies. Hence  we  find  the  pressure  is  often  more  severe  than  the  re- 
duction of  the  bank  circulation  would  seem  to  warrant.  But  the  fact  is, 
that  the  pressure  is  in  proportion  to  the  reduction  of  the  active  circulation, 
and  not  in  proportion  to  the  reduction  of  the  whole  circulation.  On  the 
other  hand,  in  seasons  of  abundance,  the  dead  circulation  is  diminished, 
the  active  circulation  proportionably  increased,  and  hence  the  stimulus 
given  to  trade  and  speculation  is  much  greater  than  the  returns  of  the 
Bank  of  England  would  warrant  us  to  expect.' "  (History  of  Banking 
in  America,  p.  96.) 

If  this  disposition  to  hoard  —  or,  more  properly,  to  make  provision  for 
future  or  contingent  demands  —  existed  in  1837  and  1839,  when  the 
Bank  of  England  had  the  unrestricted  power  of  issuing  notes,  when  there 
was  the  most  unbounded  confidence  in  her  ability  to  render  assistance,  — 
and  when  every  solvent  person  expected,  if  necessary,  to  receive  that  as- 
sistance, —  it  is  natural  to  suppose  that  this  disposition  would  be  stronger 
in  1847,  when  the  Bank  of  England  had  become  divided  into  two  depart- 
ments, —  one  of  which  could  issue  no  notes  except  against  gold,  and  the 
other  had  barely  notes  enough  to  meet  its  own  obligations.  For  this  al- 
teration in  the  condition  of  the  Bank  of  England,  and  the  consequent  feel- 
ings it  inspired,  the  act  of  1844  is  clearly  responsible. 

It  is  said  that  this  desire  of  "  hoarding  "  arose  from  PANIC  ;  and  that 
the  sum  thus  "  hoarded  "  amounted  to  £  4,000,000  of  notes.  It  is  diffi- 
cult to  state  where  prudence  ends  and  panic  begins.  This  hoarding  was 
no  doubt  carried  on  by  all  the  joint-stock  and  private  bankers,  who,  having 
received  from  the  public  large  sums  of  money  payable  on  demand,  deemed 
it  prudent  to  put  themselves  in  a  condition  to  repay  these  sums  in  case 
they  should  be  demanded.  And,  from  the  number  of  banking  establish- 
ments that  exist  in  London,  and  throughout  the  country,  it  is  reasonable 
to  suppose  that  the  sums  thus  hoarded  must  have  been  considerable. 
(Evidence  before  the  Commons'  Committee,  70,  1737,  4605,  5776.)  Many 
private  parties,  too,  from  distrust  of  their  bankers,  probably  kept  their 
hoards  in  their  own  hands.  No  blame,  however,  can  attach  to  the  bank- 
ers ;  for  although  this  "  hoarding  "  increases  the  pressure,  yet,  were  they 
not  to  adopt  this  course,  their  banks  might  stop  payment,  and  thus  a 
heavier  calamity  would  fall  upon  the  public. 

It  is  further  alleged  that  the  act  of  1844  has  deprived  the  Bank  of  Eng- 
land of  the  power  of  granting  assistance  by  the  issue  of  notes  during  a 
pressure,  even  when  the  pressure  is  most  urgent,  and  the  foreign  ex- 
changes are  favorable.  Before  the  passing  of  the  act,  when  there  was  no 
separation  of  departments,  the  bank  directors  restricted  their  issues  when 
the  exchanges  were  unfavorable,  but  extended  them  when  the  exchanges 
were  favorable.  Hence,  during  the  pressure  of  1837,  they  granted  as- 
sistance by  a  further  issue  of  notes  to  the  Northern  and  Central  Bank, 
because  the  exchanges  had  become  favorable.  Between  the  periods  of 
G  73 


A  Treatise  on  Banking. 

an  efflux  and  an  influx  of  gold  there  is  always  an  interval  of  time.  This 
val  is  usually  the  higher  point  of  the  pressure;  ami  heretofore  the 
Bunk  of  England  would  relieve  the  pressure  by  extending  her  issue  of 
notes,  in  anticipation  of  the  gold  about  to  arrive.  By  this  means  solvent 
houses  were  prevented  stopping.  Confidence  was  restored,  "  hoarding  " 
was  itimmitfrf^  and  the  pressure  removed.  But  the  art  of 
allow  this.  No  additional  notes  can  be  issued  until  the  gold  has  returned. 
The  same  course  must  be  followed  whether  the  exchanges  are  favorable 
or  unfavorable ;  and  to  anticipate  the  return  of  the  gold,  by  a  further  issue 
of  notes,  under  any  circumstances,  however  urgent,  would  be  a  departure 
the  principle  of  the  act  That  such  a  departure,  however,  may  be 
with  immense  advantage  to  the  public,  is  obvious  from  the  i  !;'•  •••-. 
immediately  followed  the  suspension  of  the  act  in  October,  1847. 
(C0SMOM,  5387  -5389.) 

Jt  is  chiefly  in  this  respect  that  the  system  established  by  the  act  differs 
from  the  system  previously  in  operation.  And  some  of  the  witnesses, 
looking  no  farther  than  this,  merely  recommended  that  a  power  to  suspend 
the  act  in  cases  of  severe  pressure,  should  be  lodged  either  with  the 
government  or  the  bank.  We  feel  no  regret  that  the  Legislature  did  not 
comply  with  this  recommendation.  It  is  this  inflexibility  of  the  act  which 
makes  the  commercial  classes  feel  the  unsoundncss  of  its  whole  principle. 
Had  a  dispensing  power  been  granted,  we  should  merely  have  fallen  back 
upon  the  previous  system,  with  the  additional  disadvantage  that  the  bank 
would  never  be  able  to  adopt  a  better  system,  even  if  so  disposed.  The 
directors  had  for  several  years  professed  to  govern  the  issue  of  notes  by 
the  foreign  exchanges,  but  departed  from  that  principle  according  to  their 
discretion.  The  act  of  1844,  by  its  inflexible  enactments,  put  this  princi- 
ple to  the  test  of  experiment  The  principle  could  not  bear  that  test,  and 
hence  the  act  was  suspended.  There  is  now  a  chance,  at  least,  that  we 
shall  get  a  better  system.  The  following  is  the  language  we  addressed  to 
the  joint-stock  banks  at  the  time  the  act  was  passed  :  — 

'•  It  must  be  acknowledged  that  the  principle  of  regulating  the  currency 
by  the  stock  of  bullion  in  the  Bank  of  England,  as  proposed  by  Sir  Rob- 
ert Peel,  is  one  which  the  joint-stock  banks,  as  well  as  the  private  banks, 
have  strongly  condemned.  But  since  we  cannot  obtain  the  adoption  of 
our  own  views,  the  question  for  our  consideration  is,  Whether  the  existing 
system  or  that  now  proposed  will  best  promote  the  interests  of  our  estab- 
lishments ?  And  we  shall  probably  determine  that  it  is  better  to  have  a 
uniform  law,  the  operations  of  which  may  be  subjected  to  some  degree  of 
calculation,  than  unknown  laws,  which  arc  applied  or  suspended  accord- 
ing to  the  impulse  of  caprice. 

**  The  proposed  measure  is  an  experiment ;  and  so  excellent  is  the 
machinery,  that  the  experiment  interferes  as  little  as  possible  with  exist- 
Big  interests.  And  the  old  machinery  being  retained  by  the  continuance 
of  the  country  issues,  the  return  is  easy  to  the  former  system,  if  neces- 
sary, before  any  serious  injury  can  be  inflicted  on  the  country. 

44  As  practical  bankers,  we  contend  that  experience  is  the  only  test  of 
the  soundness  of  a  theory.  Let,  then,  *  the  currency  principle '  be  tried 
by  this  test  If  it  succeed,  the  joint-stock  bankers,  in  common  with  every 

74 


The  Bank  Act  of  1844. 

other  class  of  the  community,  will  share  the  advantage.  If  it  fail,  then 
other  principles  will,  perhaps,  be  tried ;  and,  notwithstanding  all  the  de- 
nunciations we  have  heard  upon  the  subject,  it  may  perhaps  be  ultimately 
found  that  the  principle  of  '  competing  issues,'  as  practised  in  Scotland, 
is  the  only  effective  principle  by  which  the  currency  throughout  the  United 
Kingdom  can  be  managed." 

In  the  year  1844,  I  addressed  four  letters  to  the  joint-stock  banks,  un- 
der the  signature  of  Nehemiah.  "  The  first  was  written  a  short  time  pre- 
vious to  the  opening  of  Parliament,  the  second  soon  afterwards,  when  an 
impression  prevailed  that  a  plan  would  be  proposed  for  the  establishment 
of  one  bank  of  issue  ;  the  third,  immediately  after  Sir  Robert  Peel  had 
announced  his  measures  in  the  House  of  Commons,  and  before  the  depu- 
ties from  the  joint-stock  banks  had  held  their  meetiug  for  the  purpose  of 
considering  them  ;  and  the  fourth,  after  those  measures  had  become  law." 
The  object  of  the  third  letter,  from  which  the  above  quotation  is  taken, 
was  to  advise  the  joint-stock  banks  not  to  discuss  the  principle  of  the  cur- 
rency in  their  communications  with  the  government,  but  to  endeavour  to 
obtain  some  practical  modifications  of  the  measures  originally  proposed. 
My  advice  was  followed,  and  the  modifications  were  obtained.  The  joint- 
stock  banks  have  had  no  meeting  respecting  the  pressure  of  1847.  They 
have  consequently  expressed  no  opinion  respecting  it ;  nor  did  they  pro- 
pose any  witnesses  for  examination  before  the  parliamentary  committees. 
It  was  not  thought  advisable  that  the  joint-stock  banks,  as  a  body,  should 
interfere  with  public  questions,  except  such  as  have  a  special  reference  to 
themselves,  as  joint-stock  banks.  It  was  therefore  determined  to  watch 
the  proceedings  of  the  committees,  but  not  to  call  a  meeting  of  "  the  dep- 
uties," unless  some  measures  were  recommended  that  might  practically 
affect  the  joint-stock  banks. 

It  is  obvious  that  "  the  currency  principle  "  has  been  tried  and  has 
failed.  It  seems  now  to  be  the  proper  time  to  try  the  antagonist  principle, 
that  the  amount  of  the  domestic  currency  should  be  wholly  unaffected  by 
the  importations  or  exportations  of  bullion.  We  doubt  not  that  the  talent 
and  ingenuity  which  framed  the  act  of  1844  can  construct  a  plan  for 
bringing  this  principle  also  to  the  test  of  experiment.  When  this  is  done, 
we  will  judge  of  the  soundness  of  the  principle  by  its  results.  So  far  as 
it  has  hitherto  been  tried,  it  has  never  failed.* 

*  It  would  appear  from  the  recent  Message  of  the  President  of  the  United  States 
of  America,  that  his  principle  has  been  tested  by  the  operation  of  the  "  Constitutional 
Treasury." 

"  During  the  present  year,  nearly  the  whole  continent  of  Europe  has  been  convulsed 
liy  civil  war  and  revolutions,  attended  by  numerous  bankruptcies,  by  an  unprecedented 
fall  in  their  public  securities,  and  an  almost  universal  paralysis  of  commerce  and  in- 
dustry ;  and  yet,  although  our  trade  and  the  prices  of  our  products  must  have  been 
somewhat  unfavorably  affected  by  these  causes,  we  have  escaped  a  revulsion,  our 
money  market  is  comparatively  easy,  and  public  and  private  credit  have  advanced  and 
improved. 

"  It  is  confidently  believed  that  we  have  been  saved  from  their  effect  by  the  salutary 
operation  of  the  Constitutional  Treasury.  It  is  certain  that,  if  the  24,000,000  of  specie 
imported  into  this  coumtry  during  the  fiscal  year  ending  on  the  30th  of  June,  1 847,  had 
gone  into  the  banks,  as  to  a  great  extent  it  must  have  done,  it  would,  in  the  absence 
of  this  system,  have  been  made  the  basis  of  augmented  bank  paper  issues,  probably  to 

75 


A  Treatise  on  Banking. 

We  have  thus  endeavoured  to  trace  (impartially,  a*  wo  In-lit -v« •)  the 

practical  operation  o   the  Act  of  1M  1.     (Tin-  n-ad.-r  \\ill   timl  soiw  fur- 

ther  observations  on  this  act  in  the  section  on  "  The  Administration  of 

Ike  Banting  Deportment  of  the  Bank  of  England.")     It  is  reasonable  to 

ftuppOK,  that  under  similar  circumstance*  it  will  produce  similar  effects. 

What  will  be  its  effects  under  other  circumstances,  we  have  yet  to  learn. 

>tave  yet  to  learn  what  will  be  the  operation  of  the  act  mult -r  u  large 

rtation  of  gold,  ab  tni'iio,  from  a  favorable  state  of  tin-  exchanges; 

what  will  be  the  effect  of  the  act  during  a  pressure,  when  it  shall  not  be 

suspended  ;  and  how  its  effects  may  be  increased  or  mitigated  by  any  dif- 

it  system  of  management  on  the  part  of  the  banking  department. 

We  have  yet  to  learn  how  the  act  will  work  financially  during  a  large 

falling  off  in  the  public  revenue,  an  increase  of  taxation,  or  contracts  for 

large  government  loons  ;  and  how  it  will  work  during  a  war,  in  which  we 

may  have  to  maintain  armies  on  the  continent,  or  to  subsidize  foreign 

.  :-  \\  .  baTC  ml  '••  learn  ulu-ihrr  tin-  i>suintr  uejiartiiii  nt  \\ill  l>e 
ultimately  removed  from  the  Bank  of  England  to  the  Exchequer,  and  we 
shall  have  a  paper  .currency  issued  \>\  tin-  p.venmient  nmler  tin;  authority 
of  an  act,  the  provisions  of  which  may  be  suspended  (as  heretofore)  by 
the  same  government ;  and  also  whether  the  future  suspensions  of  the 
act  will  ever  be  influenced  by  party  or  political  considerations.  And 
finally,  we  have  yet  to  learn  how  the  act  will  work  in  case  of  any  large 
importations  of  gold  from  the  mines  of  Russia  or  California. 

We  may  be  reminded  that,  should  the  act  work  unfavorably  under  any 
of  the  above  circumstances,  there  is  one  remedy  always  at  hand,  the 
remedy  which  lias  already  been  applied,  to  suspend  it.  And  no  doubt, 
under  any  government,  men  will  be  found  who  will  have  the  courage  to 
apply  this  remedy.  But  this  will  not  remove  the  previous  evil.  The  sus- 
pension, too,  may  be  long  delayed,  and  in  the  mean  time  much  evil  may 
arise.  In  the  next  pressure  the  nation  will  be  like  "  a  cat  in  an  air- 
pump.11  The  animal  will  not  be  allowed  to  die,  but  at  what  precise 
period  of  exhaustion  relief  will  be  afforded  will  depend  upon  the  views  and 
theories  of  the  philosophic  statesman  who  may  at  the  time  be  performing 
the  experiment 

It  will  not  be  safe  for  practical  bankers  to  calculate  with  too  much  con- 
fidence upon  the  suspension  of  the  act.  They  should  make  their  arrange- 
ments on  the  supposition  that  it  will  not  be  suspended.  And  it  behoves 
them  to  inquire  what  are  the  principles  upon  which,  under  such  circum- 
stances, their  establishments  ought  to  be  administered.  This  we  shall  now 
proceed  to  do. 


I  not  less  than  60,000,000  or  70,000,000  of  dollars,  producing,  as  an  inevita- 
ble coaseaaence  of  an  inflated  currency,  extravagant  prices  for  a  time,  and  wild  spec- 
ulation, which  most  bare  been  fallowed,  on  the  reflux  to  Europe  the  succeeding  year 
of  so  much  of  that  specie,  by  the  prostration  of  the  business  of  the  country,  t',.-  suspen- 
sion of  the  bankf,  and  moat  extensive  bankruptcies.  The  rcntraining  effect  of  the  sys- 
tem MOB  lilt  tendencies  to  excessive  paper  issues  by  banks,  has  saved  the  government 
from  heavy  loss  as,  and  thousands  of  our  business  men  from  bankruptcy  and  ruin. 
The  witfdom  of  the  system  has  been  tested  by  the  experience  of  the  last  two  years,  and 
it  is  the  dictate  of  sound  policy  that  it  should  remain  undUturbcd." 

76 


The  Bank  Act  of  1844. 

We  pointed  out  at  the  passing  of  the  act  the  course  which  we  thought 
prudent  bankers  ought  to  pursue. 

"  Permit  me  now,  with  all  deference,  to  point  out  the  course  which  I 
think  the  joint-stock  banks  should  pursue.  In  future,  the  amount  of  notes 
in  circulation  will  be  regulated  by  the  foreign  exchanges.  When  the  ex- 
changes are  favorable,  money  will  be  abundant ;  when  they  are  unfavor- 
able, it  will  be  scarce.  The  evils  arising  from  a  scarcity  of  money  can 
only  be  avoided  by  following  a  prudent  line  of  conduct  when  money  is 
abundant.  We,  then,  as  prudent  bankers,  ought  at  present  to  check  our 
desires  of  making  large  profits  and  declaring  high  dividends,  and  be  con- 
tent to  employ  our  funds  at  a  low  rate  of  interest,  rather  than  lock  them 
up  in  hazardous  or  inconvertible  securities.  We  should  call  up  our  old 
over-drafts,  and  our  dead  loans,  and,  if  necessary,  increase  our  capital,  so 
as  to  place  ourselves  in  the  position  most  favorable  for  meeting  an  adverse 
state  of  the  foreign  exchanges.  In  cases  of  pressure  on  the  money  m#r- 
ket,  arising  from  an  unfavorable  course  of  exchange,  the  Bank  of  Eng- 
land will  not  be  able,  as  heretofore,  to  relieve  that  pressure  by  a  further 
issue  of  notes,  and,  so  far  from  granting  assistance  to  other  banks,  she 
may,  from  the  extent  of  her  transactions,  be  more  in  need  of  assistance 
herself.  We  must,  therefore,  conduct  our  banks,  individually,  on  a  prin- 
ciple of  self-dependence  ;  we  shal  I  have  to  limit  our  overdrawn  accounts, 
to  avoid  all  advances  on  inconvertible  securities,  and  to  call  up  such  an 
amount  of  capital  as  shall  secure  to  us  the  means  at  all  times  of  giving 
reasonable  accommodation  to  our  customers.  On  the  recurrence  of  a 
pressure  similar  to  that  of  1839,  the  cry  will  be  sauve  qui  pent,  — '  every 
one  must  take  care  of  himself.'  "  (Letters  of  Nehemiah.) 

The  knowledge  we  have  acquired  of  the  working  of  the  act  will  tend  to 
give  additional  force  to  these  recommendations.  The  attention  of  prac- 
tical bankers  will  also  be  called  to  other  points  besides  those  which  are 
here  named. 

It  will  become  a  question  with  them  to  what  extent  they  should  continue 
to  allow  interest  on  their  deposits.  Some  of  the  joint-stock  banks  in  Lon- 
don allow  interest  on  the  minimum  balance  of  a  current  account.  Others 
allow  interest  only  on  deposit  receipts.  But  most  London  bankers,  whether 
private  or  joint-stock,  allow  interest  on  the  daily  balance  to  their  country 
connections.  In  seasons  of  abundance,  however,  they  usually  limit  the 
amount  on  which  they  allow  interest,  to  prevent  themselves  being  glutted 
with  money  from  the  country  banks.  But  should  the  act  of  1844  produce 
those  frequent  alternations  from  abundance  to  pressure,  and  again  from 
pressure  to  abundance,  which  we  think  it  will  produce,  then  it  will  become 
a  matter  of  consideration  how  far  the  practice  of  allowing  interest  on  de- 
posits can  be  continued.  It  can  never  be  worth  a  banker's  while  to  allow 
interest  on  money  which  remains  in  his  hands  only  so  long  as  it  cannot 
be  employed,  and  is  taken  from  him  the  moment  it  becomes  valuable. 
During  the  year  1847  vast  sums  were  withdrawn  from  both  the  London 
and  the  country  bankers,  not  from  any  distrust  of  these  bankers,  but  with 
a  view  to  make  more  profitable  investments.  The  rate  of  interest  had 
been  for  some  time  previously  very  low.  Consols  had  been  at  par ;  and 
when  consols  fell  so  low  as  to  yield  3^  per  cent,  interest,  and  the  railway 
G*  77 


A  Trtaiitf  on  Banking. 

issued  debenture*  bearing  interest  at  five  per  cent.,  Ian:--  sums 
were  withdrawn  from  all  the  banks,  as  well  on  from  the  savings  bunks,  for 
the  purpose  of  being  invested  in  these  securities.  The  bankers  hud  no 
to  complain  of  this,  as  they  were  called  upon  only  to  fulfil  their  en- 
ix  ntt  ;  '!• ".:  tli.  %  will  (.n.kiMy  !*•  unwilling  in  future  to  allow  interest 
oo  deposits  of  this  description. 

Another  circumstance  which  the  operations  of  the  act  of  \^\\  mil  lead 
practical  bankers  to  reconsider,  will  be  the  extent  to  which  they  should 
invest  their  surplus  funds  in  government  securities.  Many  I « inkers  have 
considered  it  as  a  sound  principle  to  invest  a  certain  portion  of  their  funds 
Ifij  •,,  -:,<:,•  n:  -  BJHttl  ft,  ^  I  have  hud  l>efore  (.ur  readers  extracts  from 
evidence  given  before  parliamentary  committees  in  favor  of  this  principle, 
and  we  oiprossoH  our  own  convictions  respecting  the  same  doctrine.  I'm 
we  must  acknowledge  the  operations  of  the  act  are  sufficient  to  show  that 
this  principle  should  be  acted  upon  with  caution,  and  should  be  limited  in 
its  application.  The  act  will  cause  money  to  be  alternately  abundant  and 
scarce.  When  money  is  abundant,  the  funds  are  high  ;  and  when  money 
b  scarce,  the  funds  are  low.  In  seasons  of  abundance  the.  Linker  will  be 
full  of  deposits;  in  seasons  of  pressure  his  deposits  will  be  withdrawn,  and 
he  will,  moreover,  be  asked  to  assist  his  customers  by  further  advances. 
He  will,  therefore,  always  have  occasion  to  sell  out  of  the  funds  when  the 
price  is  low,  and  thus  he  will  sustain  loss.  It  will,  consequently,  be  his 
interest  to  employ  his  surplus  funds  in  other  investments,  or  even  t<>  keep 
his  money  unemployed  in  his  till,  rather  than  invest  it  in  government  se- 
curities. His  risk  will  be  greater  if  the  act  should  be  capriciously  sus- 
pended. In  October,  1647,  several  banks  are  said  to  have  sold  out  of  the 
funds  only  a  few  days  before  the  appearance  of  the  government  letter. 
After  the  issue  of  that  letter  the  money  was  not  wanted  ;  but,  as  the  funds 
immediately  rose,  the  money  could  not  be  replaced  but  at  considerable 
loss.  The  reports  and  proceedings  of  the  joint-stock  batiks  brought  to 
light  some  transactions  of  this  kind,  and  it  is  probable  that  the  private 
banks  sustained  heavy  losses  by  similar  transactions. 

Another  lesson  that  will  be  more  deeply  impressed  upon  the  minds  of 
practical  bankers,  will  be  to  conduct  their  establishments  in  such  a  way  as 
to  be  self-dependent  in  seasons  of  pressure. 

The  events  of  the  year  1847  are  sufficient  to  show  to  what  extent  de- 
pendence can  be  placed  on  the  Bank  of  England.  Several  of  the  direc- 
tors complained  that  every  body  looked  for  assistance  to  the  Bank  of 
England.  No  expectation  could  be  more  complimentary  to  the  bank,  nor 
•bow  more  strongly  the  confidence  she  had  inspired  under  her  previous 
government  In  no  preceding  pressure  had  she  refused  assistance  upon 
the  ground  that  she  was  unable  to  grant  it.  But  in  former  pressures  there 
was  no  separation  between  the  issuing  and  the  banking  departments.  Her 

C  strength  lay  in  the  power  she  possessed  of  expanding  the  circulation. 
power  she  surrendered  to  the  act  of  1844.     She  then  became  like 
M  any  other  banking  concern  issuing  Bank  of  England  notes."    Her  locks 
are  now  shorn.     ( Common*,  769,  3223  -  4 ,  394 1  -  2,  4566,  5389. ) 

The  Bank  of  Liverpool  had  been  one  of  the  oldest  and  most  respectable 
of  the  connections  of  the  Bank  of  England.  They  had,  from  their  com- 

78 


The  Bank  Act  of  1844. 

mencement,  never  issued  any  but  Bank  of  England  notes,  and  had  always 
a  pretty  large  discount  account  with  the  branch  at  Liverpool.  Yet,  in  the 
year  1847,  their  minute  book  contains  several  entries  similar  to  the  follow- 
ing :  —  "  The  manager  stated  he  had  seen  the  agent  of  the  branch  bank 
this  morning,  and  that  he  would  not  discount  any  thing  for  us  to-day." 
Even  in  the  comparative  light  pressure  of  April,  1847,  the  bank  suddenly 
restricted  their  discounts  ;  and  in  October,  1847,  they  were  quite  unable  to 
meet  the  public  demand,  although  in  some  cases  they  lent  consols  instead 
of  money.  Indeed,  it  was  because  the  means  of  the  bank  were  unable  to 
supply  the  demand  for  notes  that  the  act  of  1844  was  suspended  ;  yet  the 
governor,  and  all  the  other  witnesses  who  supported  the  act  of  1844, 
stated  their  opinion  that  the  pressure  of  1847  was  not  so  severe  as  some 
preceding  pressures.  How  much  sooner,  then,  would  the  means  of  the 
bank  have  been  exhausted  if  the  pressure  had  equalled  its  predecessors  in 
severity ! 

While  bankers  should  not  depend  on  the  Bank  of  England,  neither 
should  they  depend  on  the  bill-brokers.  A  broker,  as  the  name  implies, 
is  an  intermediate  party  between  the  borrower  and  the  lender.  When 
money  is  abundant,  the  bill-broker  has  large  funds  at  his  disposal,  with 
which  he  will  discount  at  a  lower  rate  of  interest  than  the  bankers.  When 
a  pressure  arrives,  these  funds  are  withdrawn,  and  his  occupation  is  gone. 
Some  bill-brokers  have  large  capitals  of  their  own,  and  take  in  deposits, 
repayable  on  demand ;  and  to  this  extent  they  may  be  regarded  as  bankers. 
When  money  is  abundant,  sometimes  cunning  people,  instead  of  going  to 
their  own  banker's,  will  take  their  bills  to  the  bill-brokers,  who  will  dis- 
count them  at  a  lower  rate  ;  and  when  the  pressure  arrives,  and  the  bro- 
kers no  longer  discount,  they  think  to  return  to  their  banker's.  It  is  said 
that  some  country  banks  have  occasionally  adopted  the  same  system. 
But  it  is  clearly  a  bad  system  for  any  bank  to  adopt.  A  bank  that  is 
dependent  on  re-discount,  will  most  likely  feel  some  inconvenience  in  a 
season  of  pressure,  even  when  the  bills  are  all  undoubtedly  good.  But 
if  the  bank  has,  from  a  desire  of  making  large  profits,  been  induced  in 
seasons  of  abundance  to  re-discount  inferior  bills,  the  results  may  be  more 
serious.  For  in  a  season  of  pressure,  a  large  portion  of  those  bills  will 
not  be  paid,  and  the  bank  will  have  to  provide  payments  for  its  own  in- 
dorsements, while  its  former  channels  of  re-discount  will  be  closed.  All 
the  joint-stock  banks  that  stopped  payment  in  1847,  had  been  accustomed 
to  re-discount ;  and  though  some  of  them  were  unsound  in  other  respects, 
yet  the  immediate  cause  of  their  stoppage  was  the  inability  to  re-discount. 
We  again  refer  to  the  proceedings  of  the  Bank  of  Liverpool.  "  The 
manager  stated  that  out  of  two  small  sums  of  £  10,000  sent  to  London  to 
the  broker's,  only  one  had  been  done."  "  We  had  then  £  100,000  at  call 
with  certain  bill-brokers,  who  were  unable  when  applied  to,  to  return  us 
more  than  .£25,000."  The  governor  of  the  bank  stated  that  the  failure 
of  the  corn  speculators  caused  the  failure  of  an  eminent  discount-broker 
having  a  large  country  connection  ;  and  this  failure,  by  closing  one  of  the 
principal  channels  of  discount  between  the  country  and  London,  caused 
distrust  to  extend  into  the  country. 

Banks  should  not  only  avoid  depending  on  the  Bank  of  England,  or  on 

79 


A  Treatise  on  Banting. 

bill-brokers ;  they  should  alto  avoid  depending  on  other  bank*.  Some 
banks  in  manufacturing  districts  are  in  the  habit  of  discounting  with  hunks 
in  agricultural  district*,  —  a  very  good  practice,  as  we  think.  Hut  the 
banks  requiring  the  discount  should  always  recollect  tliut  win -n  a  pi.  ssure 
arrives,  the  discounting  bank  may  have  other  ways  of  employing  its  funds. 
Country  banks,  too,  should  not  rely  too  much  on  their  London  agents. 
Some  London  bankers  have,  no  doubt,  immense  power.  At  the  same 
time,  in  seasons  of  pressure,  they  have  immense  claims  upon  tln-m. 
(CosMMtw,  8844-8.)  If  free  from  a  run  upon  themselves,  they  will 
endeavour  so  to  administer  their  funds  as  to  afford  reasonable  assistance  to 
all  their  connections.  And  no  one  connection  should  expect  to  m 
more  than  this  reasonable  amount  of  assistance.  But  they  may  them- 
selves be  exposed  to  danger.  The  panic  of  1847  was  not  a  hanking 
panic,  but  a  commercial  panic  ;  and  therefore  the  London  bankers  were 
comparatively  free  from  molestation.  But  banks  had  failed  in  Liverpool 
and  Newcastle,  and  this  might  have  caused  a  banking  panic  in  London. 
The  panic  of  1825  commenced  by  the  failure  of  a  country  bank.  In  such 
a  case  the  London  bonkers  could  have  rendered  but  little  assistance  to 
their  country  connections.  It  must  be  recollected,  that  the  act  of  1844 
was  suspended  upon  the  application  of  the  London  bankers.  The  gover- 
nor of  the  bank  stated  to  the  Committee  of  the  House  of  Lords,  "  The 
London  bankers  and  discount-brokers  refused  to  grant  the  usual  accom- 
modation to  their  customers,  and  necessarily  obliged  every  one  requiring 
assistance  to  resort  to  the  bank  of  England.11 

The  most  effectual  way  of  acquiring  this  self-dependence  that  we  have 
been  recommending,  is  to  call  up  an  adequate  amount  of  capital.  During 
a  pressure,  as  we  have  already  said,  a  banker  has  three  additional  claims 
on  his  funds.  In  the  first  place,  a  large  amount  of  his  deposits  may  be 
withdrawn.  Secondly,  many  of  his  customers,  and  some  probably  of  the 
wealthiest,  will  require  addititional  assistance,  in  the  way  of  loans  and 
discounts.  And,  thirdly,  he  will  think  it  prudent  to  keep  a  larger  sum  in 
his  till  to  meet  contingent  demands.  On  the  other  hand,  the  bills  he  holds 
will  not  all  of  them  be  regularly  paid  ;  the  temporary  loans  he  has  granted 
will  have  to  be  renewed  ;  and  should  he  call  up  any  of  his  permanent,  or 
dead  loans,  it  will  resemble  calling  spirits  from  the  deep.  In  this  case  he 
will  find  the  benefit  of  a  large  capital ;  and  it  is  only  by  means  of  a  large 
capital  that  all  these  operations  can  be  performed  with  comfort  to  himself 
and  satisfaction  to  his  customers.  But  if  we  increase  our  capitals  to  the 
full  extent  that  may  be  required  in  seasons  of  pressure,  we  must  not  ex- 
pect to  pay  high  dividends.  It  is  obvious  that,  with  the  same  extent  of 
business,  a  bank  with  a  large  capital  must  pay  a  lower  dividend  than  a 
bank  with  a  small  capital.  It  seems  therefore  likely  that  the  average  rate 
of  banking  profits  will  be  reduced. 

"  The  fluctuations  in  the  value  of  money  produced  by  attempting  to 

C     Mgulale  the  currency  by  the  foreign  exchanges  are  injurious  to  both  the 
.    London  and  the  country  bankers.     In  seasons  when  money  is  abundant, 

/  the  bankers  obtain  but  a  low  rate  of  interest  on  their  loans  and  discounts ; 
and  they  are  tempted  to  make  imprudent  investments  in  order  to  employ 
their  funds;  And  when,  on  the  other  hand,  money  is  scarce,  the  amount 

N 


• 


The  Bank  Act  of  1844. 

of  their  lodgments  is  reduced  ;  the  rate  of  interest  allowed  on  the  perma- 
nent deposits  is  advanced  ;  a  larger  sum  is  kept  unemployed  in  the  till ; 
and  there  is  more  danger  from  losses,  either  by  the  failure  of  parties  in 
debt  to  the  bank,  or  by  the  necessity  of  realizing  government  securities. 
Those  country  bankers  who  are  in  the  habit  of  re-discounting  their  bills  in 
London  are  induced,  when  money  is  abundant,  to  carry  this  system  to  a 
great  extent,  because  they  can  obtain  money  at  two  or  three  per  cent, 
in  London,  and  lend  it  in  the  country  at  four  or  five  per  cent.  But  when 
money  becomes  scarce  they  have  to  pay  an  exorbitant  interest  or  are 
denied  discounts  altogether,  and  they  are  then  compelled  to  refuse  their 
customers  their  usual  accommodation,  and  then  great  distress  is  occasioned 
in  the  provinces.  Except  under  peculiar  circumstances,  both  the  extremes 
of  abundance  and  scarcity  of  money  are  unfavorable  to  large  banking 
profits,  —  a  state  in  which  money  is  easy  without  being  abundant,  and 
valuable  without  being  scarce,  is  the  most  conducive  to  the  prosperity  of 
both  the  banking  and  the  commercial  interests  of  the  country."  (An  In- 
quiry into  the  Causes  of  the  Pressure  on  the  Money  Market  during  the 
year  1839.) 

While,  however,  the  profits  of  a  banker  from  the  ordinary  operations 
of  his  business  may  be  diminished,  it  is  possible  he  may  have  opportuni- 
ties  of  making  other  profits  by  those  fluctuations  in  the  prices  of  public 
securities,  which  usually  occur  in  the  different  periods  of  a  circle  of  the 
currency.  In  the  first  period,  immediately  after  a  pressure,  money  is 
abundant  without  speculation  ;  in  the  second  period,  money  is  abundant 
and  speculations  abound  ;  in  the  third  period,  speculation  begins  to  decline 
and  money  is  in  demand  ;  in  the  fourth  period,  money  is  scarce  and  a 
pressure  arrives.  It  is  impossible  to  say  how  long  each  of  these  periods 
may  last,  as  they  will  be  influenced  by  political  events,  the  abundance  of 
the  harvests,  the  direction  which  speculation  may  take,  and  the  state  of 
the  public  mind.  Their  approach  or  decline  is  generally  indicated  by  the 
stock  of  gold  in  the  Bank  of  England. 

During  the  first  period  money  will  be  abundant,  because  the  importation 
of  gold  will  cause  an  increased  issue  of  bank-notes ;  because,  the  import 
of  commodities  being  diminished,  there  will  be  fewer  bills  drawn  from 
abroad  upon  English  houses  and  offered  for  discount  to  the  London  bank- 
ers ;  and  because  trade  will  have  become  paralyzed  at  home,  and  prices 
will  have  fallen,  so  that  less  money  will  be  required  to  carry  it  on.  A 
banker  at  this  period,  will  have  more  money  than  he  can  employ.  But 
at  this  period,  the  prices  of  the  public  funds  and  of  other  securities  are 
low.  The  act  of  1844,  by  causing  great  fluctuations  in  prices,  gives 
great  advantage  to  prudent  capitalists,  at  the  expense  of  the  less  prudent 
or  less  wealthy  classes  of  the  community.  "  All  fluctuations  in  trade," 
says  Mr.  Gurney,  "are  advantageous  to  the  knowing  man."  (Lords, 
1324.)  To  those  who  are  not  "  knowing  men,"  these  fluctuations  are 
injurious.  The  abundance  of  the  circulation  produces  a  multiplication  of 
contracts,  and  then  the  contraction  of  the  circulation  produces  an  inability 
to  fulfil  them.  (Lords,  3845.)  And  those  who  have  stock  or  any  other 
kind  of  salable  property,  are  obliged  to  realize  in  order  to  fulfil  their 
engagements.  Bankers  may,  during  this  period,  make  advantageous  in- 

81 


A  Trtalitf  on  UanLing. 

i ;  and  a*  they  may  calculate  that  another  pressure  will  not  ar- 
rive for  two  or  three  years,  they  may  purchaae  a  limited  amount  of  secu- 
rities that  haw  six  or  twelve  month*  to  run,  During  tin-  second  p-riod, 
money  will  be  in  demand,  though  there  may  bo  no  great  advance  m  :ln- 
rale  of  interval.  The  securities  pun- IK  IMC  I  l>\  the  !>ank.T  in  tin-  tirst  (•<•. 
nod,  wilt  now  be  (ailing  due  or  advancing  in  price.  But  this  will  !><•  ;ln- 
period  of  his  greatest  danger,  and  he  must  have  a  can-  not  t<>  let  Ins  de- 
sire of  getting  higher  interest  lead  him  to  moke  undue  advnnrt  s  UJMUI  the 
commodities  or  securities  that  may  be  the  subject  of  speculation.  The 
third  period  will  be  the  most  profitable  for  the  banker  in  his  direct  busi- 
ness. Money  will  bo  in  full  demand  at  a  good  rate  of  interest,  and  his 
deposits  will  hardly  have  begun  to  decline.  He  should  now  sell  out  stock 
and  exchequer  bills,  or  any  other  securities  likely  to  be  affected  by  the 
approaching  pressure.  He  should  make  advances  only  by  discounting 
v.  !••  ||  s  BJ  inik:!^'  sh»r!  loan*.  I  !••  should  \seed  liis  accounts  of  such 
customers  as  have  deeply  engaged  in  the  previous  speculations ;  and  put 
himself  in  a  condition  to  support  liberally  through  the  pressure  those  who 
may  be  entitled  to  his  assistance. 

It  seems  therefore  probable  that  bankers  will,  under  the  act  of  1844, 
endeavour  to  make  up  for  diminished  profits  by  dealing  more  largely  in 
securities.  According  to  the  evidence  of  Mr.  Pease,  the  fluctuations  in 
UK  currency  have  already  produced  similar  effects  in  the  departments 
of  trade  and  commerce. 

*  I  Mated,  M  clearly  aa  I  was  able  to  do,  that  the  mnn  who  bought  from  hand  to 
month,  which  is  the  common  case,  and  did  not  watch  those  fluctuations  of  capital,  so 
as  to  bar  when  things  were  unusually  depressed,  and  to  sell  when  things  rose  again, 
failed.  The  only  man  who  succeeded  in  making  money,  succeeded  in  rum-ing  on  a 
speculative  kind  of  business,  that  has  arisen  from  the  want  of  regularity  in  the  values 
of  money  sad  produce.  The  man  who  did  not  so  speculate  —  buying  largely  at  one 
time,  sad  selling  very  freely  at  another  —  did  not  succeed."  "  It  is  of  great  'iinnort- 
ance  that  persons  who  do  not  desire  to  carry  on  a  speculative  business,  should  have 
some  assurance  that  it  is  moderately  productive.  That  assurance  they  have  lost,  by 
bete*  raddenly  deprived  by  those  fluctuations  of  that  which  they  thought  they  had  se- 
cured by  their  industry."  (Common*,  4700,  4702.) 

Though  we  would  not  confound  this  kind  of  speculation  with  that  which 
takes  place  by  means  of  time  bargains  on  the  Stock  Exchange,  yet  we  do 
not  think  it  desirable  that  banks  should  deal  in  the  public  securities  mere- 
ly  with  a  view  of  making  a  profit  from  the  fluctuations  in  price.  Some- 
times the  banker  will  be  out  in  his  calculations,  and,  instead  of  selling  at 
a  profit,  he  will  have  to  sell  at  a  loss,  or  else  submit  to  a  lock-up  of  his 
funds.  And  at  all  times  there  is  a  danger  that  he  will  acquire  a  specula- 
tive feeling,  which  will  lead  him  to  disregard  the  steady  pursuit  of  his 


SECTION  DC.—  THE  ADMINISTRATION  OF  THE  BANKING  DE- 
PARTMENT OF  THE  BANK  OF  ENGLAND. 

BT  the  act  of  1844,  the  banking  department  of  the  Bank  of  England 
was  separated  from  its  issuing  department ;  and  was  to  be  managed  like 

82 


The  Bank  of  England. 

"any  other  banking  concern  issuing  Bank  of  England  notes."  Taking 
this  view  of  the  banking  department,  we  propose  to  inquire  on  what 
principles  it  ought  to  be  administered.  We  shall  do  this,  however,  not 
so  much  with  the  view  of  bringing  forward  any  notions  of  our  own,  as  to 
lay  before  the  reader  some  account  of  those  principles  which  the  bank 
directors  have  adopted  for  their  government.  This  will  lead  us,  perad- 
venture,  to  discuss  some  principles  of  practical  banking  to  which  we  have 
not  hitherto  had  occasion  to  refer.  We  shall  then  trace  the  operations 
of  this  department  since  the  passing  of  the  act  of  1844. 

The  Bank  of  England  is  governed  by  a  court  of  directors,  consisting 
of  twenty-four  members.  These  are  selected  from  the  mercantile  classes 
of  London,  virtually,  by  the  other  directors,  who  form  what  is  called  a 
House  List.  They  recommend  certain  persons  to  be  chosen  as  directors, 
and  the  proprietors  always  follow  this  recommendation.  The  court  hold 
their  meetings  every  Thursday,  and  they  then  receive  a  report  of  the 
transactions  of  the  preceding  week. 

The  executive  administration,  in  the  mean  time,  is  in  the  hands  of  the 
governor  and  deputy-governor,  who  may  be  advised  or  assisted  by  the 
committee  of  treasury.  This  committee  is  composed  of  those  directors 
who  have  held  the  office  of  governor,  of  the  existing  governor  and  deputy- 
governor,  and  of  the  director  who  is  intended  to  be  the  next  deputy-gov- 
ernor. A  director  is  at  first  an  ordinary  director,  and  attends  the  weekly 
meetings  of  the  court.  In  turn  he  becomes,  for  one  year,  a  member  of 
the  committee  of  treasury ;  then  deputy-governor  for  two  years ;  then 
governor  for  two  years ;  and  afterwards  a  permanent  member  of  the 
committee  of  treasury.  This  committee  meet  once  a  week,  and  at  such 
other  times  as  they  may  be  called  together  specially  by  the  governor. 
Sometimes  they  discuss  the  measures  that  are  to  be  submitted  to  the  next 
meeting  of  the  court ;  but  the  court  do  not  now  so  readily  as  formerly 
adopt  their  recommendations.  The  governor  and  deputy-governer,  for 
the  time  being,  make  all  loans  and  advances,  and  sometimes  raise  the 
rate  of  discount,  without  waiting  for  the  opinion  of  the  court.  They 
conduct  all  negotiations  with  the  government,  and,  subject  to  the  sanc- 
tion of  the  court,  have  the  whole  administration  of  the  affairs  of  the  bank. 
Each  director  must  hold  £  2,000  bank  stock ;  the  deputy-governer, 
£  3,000  ;  and  the  governor,  £  4,000.  It  was  the  rule  that  every  director 
should  take  his  turn  for  becoming  governor,  but  recently  it  has  been 
determined  to  place  in  that  office  the  director  whom  the  other  directors 
shall,  by  ballot,  think  best  qualified.  Several  suggestions  were  made  be- 
fore the  parliamentary  committees,  for  improving  the  composition  of  the 
court  of  directors.  It  was  proposed  that  all  the  directors  should  not  be 
taken  from  the  commercial  classes,  but  that  some  should  be  selected 
from  the  banking  and  manufacturing  interests.  It  was  also  asked,  wheth- 
er a  permanent  governor,  either  for  life  or  for  a  number  of  years,  would 
not  be  preferable  to  the  present  system. 

The  act  for  separating  the  two  departments  came  into  operation  on  the 
31st  August,  1844,  and  the  following  was  the  first  return  made  under  the 
act,  showing  the  condition  of  the  banking  department  on  the  7th  of  Sep- 
tember, 1844 :  — 

83 


A  TVeolwe  on  Banking. 


'.  i 


IV. 


IMCB   DEPARTMENT. 

£ 

Oorcmrnent  il. 
Other  seruritirs, 

(..'1,1  coin  and  bullion, 
Silver  bullion,    . 


BAKK1NO    DEPARTMENT. 


Or. 
£. 

11,015,100 
3,984,900 

12,657,208 
1,694,087 


£28,351,295 


Proprietors'  capital, 


NM 


Otar  deposit*, 

Scvcn-d*y  and  other  bill*, 


£ 
.     14,553,000 

3,564,729 
.       3,630,809 

8,644,348 
.       1,030,354 

£31,423,240 


£ 

Government  securities,          .    14,554,834 
<  Mlior  securities,        .        .          7,835.616 

Notes, 8,175,025 

Gold  and  silver  coin,        .  857,765 


£31,423,240 


It  will  be  seen  from  the  above,  that  the  means  or  funds  of  the  banking 
department  for  carrying  on  its  business,  consists  of, —  1.  The  paid-up 
capital ;  2.  The  rest,  or  surplus  fund ;  3.  The  public  deposits ;  4.  The 
other  deposits ;  5.  The  seven-day  and  other  bills.  These  funds  are  in- 
Tested  in  "  government  securities "  and  in  "  other  securities,"  and  the 
remainder  is  kept  as  a  reserve  in  the  till. 

1.  Viewing  this  as  the  condition  of  a  private  and  independent  bank,  the 
first  thing  that  would  strike  the  mind  of  a  practical  banker  would  be  the 
large  amount  of  the  PAID-UP  CAPITAL.     The  capital  is  £  14,553,000 ; 
while  the  total  deposits  are  only  £  12,275,157.     The  object  of  a  large 
capital  is,  in  the  first  place,  to  secure  the  public  confidence  ;  then,  to  have 
the  means  of  repaying  the  deposits  whenever  demanded ;  and  also,  of 
affording  to  the  customers  of  the  bank  every  reasonable  accommodation 
in  the  way  of  loans  or  discounts.     But  after  making  due  provision  for 
these  objects,  this  amount  of  capital  appears  unnecessarily  large.     Were 
it  only  ;£  7,000,000,  that  would  be  amply  sufficient  for  carrying  on  the 
present  extent  of  business,  and  the  rate  of  dividends  might  then  be  in- 
creased.    AH  above  this  amount  could  only  be  invested  in  government 
securities,  never  likely  to  be  required  for  banking  purposes ;  and  if  re- 
quired, could  not  be  suddenly  realized,  or  at  least  not  within  the  period 
in  which  they  are  likely  to  be  wanted. 

2.  The  next  thing  that  would  appear  remarkable  for  a  private  bank,  is 
the  large  amount  of  the  REST,  or  surplus  fund. 

The  Rest,  or  surplus  fund,  or  Guarantee  Fund,  as  it  is  sometimes 
called,  consists  of  the  accumulation  of  surplus  or  remaining  profits  after 
the  payment  of  the  dividend.  The  object  of  this  fund  is  not  to  guarantee 
the  public  for  the  security  of  their  deposits,  but  to  guarantee  to  the  share- 
holders the  uniformity  of  the  dividend.  If,  in  any  one  year,  the  profits 
fall  below  the  amount  required  to  pay  the  usual  dividend,  the  deficiency 

*  The  Table  on  the  next  page  will  give  a  more  detailed  account  of  tome  of  the 
(Ms*  fa  the  above  return. 

84 


The  Bank  of  England. 

is  taken  from  the  rest  or  surplus  fund.  The  amount  of  this  fund  should 
be  regulated  by  the  extent  of  the  business  and  the  probable  loss  that 
might  arise  in  conducting  that  business.  If  the  fund  is  five  or  six  times 
the  amount  of  the  deficiency  that  might  possibly  arise  in  making  up  the 
annual  dividend,  it  would  appear  to  be  sufficient.  For  if,  after  making 
up  this  deficiency  for  one,  two,  or  three  years,  it  should  appear  that  the 


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A  Trealut  on  Banking. 

profits  of  the  bank  had  become  permanently  diminished,  then  the  course 
would  be  to  reduce  the  dividend  until  the  surplus  fund  hud  recovered  its 
former  amount 

Banks  that  have  made  large  profits  have  cither  increased  the  dividend, 
or  distributed  them  among  the  shareholders  in  the  form  of  bonuses,  or 
have  added  them  to  the  capital.  The  Bank  of  England  hnve  adopted  all 
theae  plans.  Yet,  after  all  these  distributions  of  increased  dividends,  bo- 
nuses, and  additional  capital,  the  bank  had  on  the  7th  of  September,  1K-M, 
*  rest,  arising  from  surplus  profits,  of  :£  3,564,729.  No  other  "  kinking 
concern  carrying  on  business  with  Hank  of  England  notes,"  would  think 
it  neceasmry  to  keep  such  a  rest.  Neither  the  kind  nor  the  extent  of  busi- 
ness carried  on,  is  ever  likely  to  require  any  thing  like  this  amount  to 
meet  any  occasional  louse-.  The  amount  is  altogether  excessively  dispro- 
portionate to  the  purposes  for  which  a  surplus  fund  is  usually  applied,  and 
at  the  same  time  it  tends  to  give  on  erroneous  view  of  the  profits  of  the 
bank.  This  rest  is  employed  in  the  business,  and  yields  profits,  but  it 
pay*  no  dividends.  The  profits  go  to  swell  the  dividend  on  the  capital, 
and  hence  the  capital  appears  to  yield  a  profit  of  7  per  cent.  But  the 
dividend  of  7  per  cent  is  not  mode  upon  the  capital  alone,  but  on  the 
capital  and  rest  together,  and  hence  upon  the  funds  employed  it  amounts 
to  only  about  5}  per  cent 

3.  The  DEPOSITS. 

The  Public  Deposits  are  thus  classified :  — 

£ 

Exchequer  account, 2,198,000 

For  payment  of  Dividends, 315,000 

Saving  Banks,  &r., 501,000 

Other  public  accounts, 617,000 

£3,631,000 

The  u  Exchequer  account"  is  the  current  account  with  the  govern- 
ment, and  this  account  is  credited  with  the  amount  of  the  taxes  as  they 
are  lodged  in  the  bank.  In  the  beginning  of  January,  April,  July,  and 
October,  this  account  is  debited  for  the  amount  necessary  to  pay  the 
quarterly  dividends,  and  the  amount  is  carried  to  the  credit  of  the  ac- 
count u  for  payment  of  dividends."  The  balance  here  standing  to  the 
credit  of  this  account  is  the  amount  of  the  dividends  that  had  not  then 
been  claimed.  The  next  account  is  called  "  Savings  Banks,  &c."  The 
trustees  of  the  savings  banks  throughout  the  country  are  required  to  lodge 
the  deposits  in  the  Bank  of  England  to  the  credit  of  the  Commissioners 
for  the  Reduction  of  the  National  Debt,  who  afterwards  invest  it  in  the 
public  funds.  We  do  not  know  what  is  meant  by  "  &c.,"  nor  yet  by  the 
**  other  public  accounts."  We  believe  there  are  certain  accounts  con- 
nected with  the  Court  of  Chancery  that  are  required  to  be  kept  with  the 
Bank  of  England ;  and,  by  the  last  bankruptcy  law,  the  effects  of  bank- 
rupts* estates  are  required  to  be  lodged  in  some  one  or  other  of  the 
branches.  These  may  form  the  "  other  public  accounts." 


86 


The  Bank  of  England. 

The  Private  Deposits  are  thus  classified  :  — 

£ 

Railways, 30,000 

London  Bankers, 963.000 

East  India  Company, 636,000 

Bank  of  Ireland,  Royal  Bank  of  Scotland,  &c.,         .  1 75,000 

Other  Deposits,      .        .        .        .        .        .        .        .  5,631,000 

Deposits  at  Branches, 1,209,000 

8,644,000 

With  regard  to  both  the  public  and  the  private  deposits,  a  banker  would 
inquire  whether  they  were  fluctuating  or  permanent ;  whether  repayable 
at  fixed  periods,  or  liable  to  be  suddenly  withdrawn.  He  would  thus  as- 
certain what  proportion  could  be  profitably  employed,  and  what  amount 
should  be  kept  in  the  till,  to  meet  constant  or  occasional  demands.  He 
would  observe  on  inspection  that  the  balance  of  the  "  exchequer  account " 
increases  gradually  during  the  quarter,  from  the  receipt  of  the  taxes,  until 
the  commencement  of  the  next  quarter,  when  it  is  largely  reduced  by  the 
payment  of  dividends.  He  will,  therefore,  provide  for  these  quarterly 
payments ;  but  his  provision  will  be  less  ample  when  informed,  that,  as 
the  public  deposits  decline,  the  private  deposits  will  increase,  and  more 
especially  those  of  the  London  bankers.  This  is  partly  in  consequence 
of  the  bankers  holding  powers  of  attorney  to  receive  the  dividends  due  to 
parties  who  reside  in  the  country,  and  partly  because  the  abundance  of 
money  caused  by  the  payment  of  dividends  increases  their  own  deposits, 
and  thus  enables  them  to  keep  for  a  time  larger  balances  in  the  Bank 
of  England.  We  have  already  said  that  no  rule  can  be  given  as  to  the 
amount  of  notes  which  any  banker  should  keep  in  his  till,  —  the  proper 
amount  can  be  ascertained  only  by  experience.  But  we  should  imagine 
that  in  ordinary  times  the  deposits  in  the  Bank  of  England  are  sufficiently 
steady  to  prevent  any  perplexity  on  the  subject.  We  may  be  asked  what 
we  mean  by  "  ordinary  times,"  since  now  every  year  differs  from  its  pre- 
decessor, and  the  steadiness  and  uniformity  which  heretofore  characterized 
banking  and  commercial  affairs  are  no  longer  known.  We  reply,  that  by 
"  ordinary  times,"  we  mean  those  times  that  are  the  least  affected  by  the 
foreign  exchanges.  For  some  years  past  it  has  been  the  practice  to  reg- 
ulate the  issue  of  bank  notes  by  the  foreign  exchanges.  When  the  foreign 
exchanges  bring  gold  into  the  country,  bank  notes  are  issued  against  it, 
money  becomes  abundant,  and  the  bank  deposits  increase.  When  the 
exchanges  take  out  gold,  the  bank  notes  are  diminished,  and  the  bank  de- 
posits decline.  This  system  has,  in  a  great  measure,  been  acted  upon  by 
the  bank  directors  since  the  year  1832,  and  it  is  now  rigidly  enforced  by 
the  act  of  1844.  These  extraordinary  seasons  of  great  influx  or  great 
efflux  of  gold  appear  to  be  subject  at  present  to  no  general  rules.  But  at 
other  times  there  seems  to  be  no  reason  why  the  Bank  of  England  should 
not  profitably  employ  a  large  portion  of  her  deposits.  We  may  observe, 
however,  that,  as  the  bank  allows  no  interest  on  any  of  her  deposits,  she 
sustains  no  loss  even  when  they  are  not  employed  ;  but  were  they  to  be 
employed,  her  profits  would  be  greater. 

87 


A  Treatise  on  Banking. 

4.  With  regard  to  the  INVESTMENTS,  a  hanker  \vonUi  inquire  first,  Are 
they  safe  ?  Secondly,  Are  they  convertible  ? 

Th-  -re  seem-  no  Around  to^MMfan  faAt  vilery. —  their  ei.nvertiliility 
w  not  ao  obvious.  The  (Jnv.  -rnment  s'<*-k.  Kvhemier  hills,  and  East 
India  bonds,  must  be  considered  in  ordinary  times,  ami  to  a  reasonable 
amount,  as  strictly  convertible.  But  this  is  not  the  cane  with  the  ( Jovern- 
inent  annuities.  They  could  not  be  Bold  in  the  market  ;  ami  even  l.y 
private  negotiations,  tow  buyers  would  be  found,  except  the  insurance 
offioa*.  Even  with  them  the  negotiations  would  probably  occupy  consid- 
erable time.  As  to  the  city  bonds,  railway  bonds,  and  mortgages,  they 
would  in  a  season  of  pressure  be  altogether  useless.  It  may  bo  said,  that 
the  bank's  capital  being  so  large,  a  portion  may,  without  inconvenience, 
be  locked  up  in  dead  securities.  This  observation  is  valid  to  a  certain 
extent,  but  not  to  an  indefinite  extent,  and,  after  giving  it  due  weight,  the 
amount  thus  invested  seems  too  large. 

The  annuities  form  a  large  portion  of  the  amount  of  the  "  Stock  and 
Annuities."  The  first  is  an  annuity  of  .£585,740,  usually  called  the 
"Dead  Weight,"  which  commenced  on  the  5th  April,  1823,  and  is  to 
continue  for  forty-four  years  from  that  time.  Other  annuities  arose  out 
of  the  Bank  Charter  Act  of  1833.  The  government  were  to  pay  to  the 
bank  one  fourth  of  the  permanent  debit  of  £  14,686,800,  amounting  to 
jtf  3,67 1,700.  At  first  it  was  arranged  that  the  bank  should  receive  in 
payment  of  this  sum  £4,000,000  three  per  cent,  reduced  annuities;  but 
it  was  afterwards  changed  to  an  annuity  for  twenty-six  years,  and  will 
expire  in  1860,  at  the  same  time  as  the  "  Long  Annuity." 

The  bills  discounted,  and  the  short  loans  called  "  Advances  on  bills  of 
exchange,  exchequer  bills,  stock,  &c.,"  are  most  legitimate  banking  in- 
vestments. 

The  plan  of  granting  short  loans  was  commenced  in  1829,  to  obviate  that 
tightness  in  the  money  market  which  was  felt  for  a  month  or  six  weeks 
before  the  payment  of  the  dividends,  through  the  gathering  in  of  the 
taxes  into  the  exchequer.  The  rate  of  interest  charged  was  usually  about 
one  per  cent  less  than  the  discount  charged  on  bills.  The  loans  were 
repayable  to  the  bank  at  about  the  time  that  the  dividends  were  paid  to 
the  public.  Notices  were  issued,  stating  the  rate  of  interest,  and  the  kind 
of  securities  on  which  loans  would  be  made,  and  the  time  of  repayment. 
The  first  notice  was  issued  on  the  3d  of  December,  1829,  and  the  prac- 
tice continued  until  after  the  passing  of  the  act  of  1844. 

Advances  on  deficiency  bills  are  a  kind  of  short  loans  made  to  the  pnv- 
emment,  whenever  the  taxes  are  less  than  sufficient  to  pay  the  public 
dividends.  These  advances  seem  to  be  very  legitimate.  The  bank  has 
one  large  customer.  A  customer  who  keeps  large  deposits  will  some- 
times require  large  advances.  These  advances  may,  peradventure,  be 
wanted  at  a  time  when  it  may  not  be  exactly  convenient  for  the  banker  to 
make  them.  All  large  accounts  may  at  times  be  attended  with  some  in- 
convenience. But  if  a  banker  takes  such  accounts,  he  must  make  his  ar- 
rangements accordingly.  In  the  present  case,  the  bank  has  the  advan- 
tage of  knowing,  by  the  progress  of  the  lodgments  on  the  "  Exchequer 
account,"  whether  such  advance  is  likely  to  be  required. 

88 


The  Bank  of  England. 

When  the  government  requires  these  advances,  the  bank  must  either 
make  them  out  of  her  reserve  in  the  till,  or  sell  public  securities  to  obtain 
bank-notes,  or  restrict  her  advances  to  other  parties.  It  is  peculiarly  un- 
fortunate that  the  government  is  more  likely  to  require  these  advances  in 
seasons  of  pressure,  inasmuch  as  in  those  seasons  the  taxes  are  usually 
less  productive  and  are  less  punctually  paid.  Hence  the  bank  may  be 
called  upon  to  make  advances  to  government  at  the  same  time  that  simi- 
lar advances  are  required  by  the  commercial  classes.  In  some  cases  the 
bank  might  not  have  the  means  of  making  advances  to  both  parties.  Had 
the  government  required  such  advances  in  October,  1847,  the  commercial 
distress  must  have  been  considerably  increased. 

5.  THE  RESERVE.  —  A  practical  banker  would,  at  first  sight,  consider 
this  reserve  as  too  large.  From  the  amount  and  character  of  the  depos- 
its it  would  not  appear  that  so  large  a  reserve  was  necessary,  and  a  portion 
might  well  be  employed  in  earning  interest,  instead  of  lying  unproductive 
in  the  till.  But,  before  we  condemn  the  bank  directors,  we  must  give  this 
matter  further  consideration.  We  have  already  stated,  that,  even  before 
the  passing  of  the  act  of  1844,  the  directors  had  been  in  the  habit  of  issu- 
ing their  notes  against  gold  and  silver  bullion ;  and  when  a  large  amount 
of  notes  had  not  been  thus  issued,  the  deposits  in  the  bank  were  increased. 
Now,  when  this  act  came  into  operation, — August  31st,  1844,  —  the  bank 
had  in  this  way  acquired  a  large  amount  of  gold  and  silver  bullion  ;  in- 
deed, she  does  not  ever  before  appear  to  have  had  so  large  an  amount  in 
the  whole  course  of  her  history.  If  we  look  to  those  years  which  preceded 
pressures  (for  in  these  years  gold  on  hand  is  usually  large),  we  shall  find 
that  in  1824  the  amount  was  £  13,810,080 ;  in  1836  the  highest  quota- 
tion is  £7,801,000;  and  in  1838  it  is  £  10,126,000;  but  on  the  7th  of 
September,  1844,  the  amount  returned  in  the  issue  department  is,  gold 
.£12,657,208,  and  silver  £1,694,087,  while  the  sum  of  £9,032,790 
was  retained  in  the  banking  department.  Notes,  of  course,  had  been 
issued  against  all  this  bullion,  and  the  deposits  in  the  bank  had  conse- 
quently increased.  "  Well,"  it  may  be  said,  "  this  will  account  for  the 
increase  of  the  deposits,  but  not  for  the  increase  of  the  reserve.  Why 
were  not  the  deposits  invested  ? "  We  will  explain  this.  There  are 
some  classes  of  investments  which  the  bank  directors  can  make  indepen- 
dently of  other  parties.  For  instance,  they  can  purchase  government 
stock,  exchequer  bills,  and  railway  bonds,  just  as  they  please.  But,  as 
we  have  stated,  it  is  not  prudent  in  a  banker  to  invest  the  temporary  in- 
crease of  his  deposits  in  this  way,  as,  when  the  deposits  are  withdrawn, 
he  may  have  to  sell  these  securities  at  a  lower  price,  and  thus  sustain 
loss.  There  are  other  classes  of  investments  for  which  the  bank  is,  to  a 
certain  extent,  dependent  on  other  parties ;  such,  for  example,  as  the  dis- 
counting of  bills  and  the  granting  of  loans.  The  bank  directors  cannot 
invest  their  money  in  these  ways  unless  there  are  parties  willing  to  receive 
it.  Now,  while  a  portion  of  the  notes  issued  against  gold  and  silver  bul- 
lion are  lodged  with  the  bank  in  the  form  of  deposits,  another  portion,  and 
sometimes  the  largest  portion,  do  not  go  into  the  bank,  but  are  circulated 
among  the  public,  and  soon  find  their  way  into  the  hands  of  bankers,  bill- 
brokers,  and  money  dealers,  who,  from  the  abundance  of  money,  will 


A  Treatue  on  Banking. 

discount  bills  and  grant  short  loans  at  a  lower  rate  of  interest  than  the 
bank.  The  bank  will,  therefore,  have  no  further  application*.  \Vhen 
her  bills  and  loans  fall  due,  they  will  bo  paid,  and  the  immunt  will  go  to 
increase  her  reserve.  Thus  it  appears  that  the  notes  which,  in  .1  Live- 
able course  of  the  foreign  exchanges,  are  issued  against  gold  and  silver 
bullion,  will  tend  in  two  ways  to  increase  the  bank  reserve  ;  first,  by  in- 
creasing her  deposits,  and  secondly,  by  diminishing  her  securities.  This 
will  account  for  the  large  amount  of  the  reserve.  The  rule  laid  down  by 
the  directors  is,  that  the  reserve  should  be  about  one  third  the  amount  of 
the  deposits. 

Having  given  these  explanations,  we  shall  now  proceed  to  notice  the 
operations  of  the  banking  department  of  the  Bank  of  England  since  its 
separation  from  the  issuing  department  by  the  act  of  1844  :  — 

I.  The  operations  of  the  Banking  Department,  from  the  passing  of  the 
act  in  1844,  to  September  5,  1845. 

The  act  came  into  operation  on  the  31st  of  August,  1844,  and  almost 
immediately  some  important  changes  were  introduced.  Up  to  that  date 
the  bank  had  never  discounted  at  a  lower  rate  than  four  per  cent.  This 
rate,  in  ordinary  times,  had  seldom  varied,  and  all  bills  discounted  at  the 
same  time  were  charged  the  same  rate.  But,  on  the  5th  of  September, 
the  rate  of  discount  on  bills  was  reduced  from  four  to  two  and  a  half  per 
cent,  and  on  notes  to  three  per  cent.  On  the  18th  of  March,  1845,  the 
bank  introduced  the  principle  of  a  minimum  rate  of  discount ;  fixing  two 
and  a  half  per  cent  as  the  rate  on  first-rate  bills,  and  charging  a  higher 
rate  on  other  bills.  The  object  of  these  changes  was  to  employ  a  portion 
of  the  reserve  in  the  discount  of  bills. 

This  line  of  conduct  was  by  no  means  unwarranted  by  the  practice  of 
"other  banking  concerns."  It  is  an  established  principle  in  practical 
banking,  that  a  banker,  when  he  cannot  employ  his  surplus  funds  at  so 
high  a  rate  of  interest,  as  he  wishes  to  obtain,  should  employ  those  funds 
at  a  lower  rate,  rather  than  keep  them  unemployed  in  his  till.  And  it  is 
also  an  established  practice  to  charge  different  rates  of  discount  on  difl'-r- 
ent  bills,  according  to  the  class  or  character  of  the  bills,  the  respectability 
of  the  parties,  the  time  they  have  to  run,  and  a  variety  of  other  circum. 
stances.  In  adopting  these  regulations,  therefore,  the  directors  were  only 
performing  the  work  assigned  to  them,  of  conducting  the  banking  depart- 
ment "  like  any  other  banking  concern  issuing  Bank  of  England  notes." 

These  changes  gave  rise,  in  the  parliamentary  committees  of  1847,  to 
some  discussion  upon  the  question  as  to  whether  the  Bank  of  England 
governed  the  market-rate  of  interest,  or  the  market-rate  of  interest  gov- 
erned the  bank-rate.  There  can  be  but  little  difference  of  opinion  upon 
this  subject.  The  "market-rate"  of  interest  is  the  rate  which  bankers 
and  bill-brokers  charge  for  discounting  first-class  bills  to  the  public. 
When  the  foreign  exchanges  are  bringing  gold  into  the  country,  and  notes 
are  issued  against  this  gold,  the  abundance  of  money  in  the  hands  of  the 
bankers  and  bill-brokers  causes  the  market-rate  of  discount  to  fall  below 
the  bank-rate.  If  during  this  season  the  bank  charges  a  high  rate,  she 
gets  but  few  bills.  On  the  other  hand,  when  gold  is  going  out  of  the 

90 


The  Bank  of  England. 

country,  and  money  becomes  scarce,  the  market-rate  is  higher  than  the 
bank-rate.  If  during  this  period  the  bank  charges  a  low  rate,  she  must 
soon  limit  her  discounts,  or  her  reserve  will  be  exhausted.  But,  though 
the  bank  cannot  change  the  course  of  the  current,  she  can  give  it  in- 
creased strength.  Though  she  cannot  make  money  dear  when  it  is 
cheap,  nor  cheap  when  it  is  dear,  yet  when  it  is  cheap  she  can  make  it 
cheaper,  and  when  it  is  dear  she  can  make  it  dearer.  Hence,  every  al- 
teration in  the  bank-rate  has  always  an  immediate  influence  on  the 
market-rate. 

Such  was  the  case  in  September,  1844.  The  large  importations  of 
gold  had  reduced  the  market-rate  of  discount  to  2£  per  cent.,  while  the 
bank  charged  4  per  cent.  But  when  the  bank  reduced  her  rate  to  2^ 
per  cent.,  the  market-rate  went  down  to  2,  and  even  to  1|  per  cent.  To 
engage  actively  in  discounting  bills  was  a  new  feature  in  the  bank  man- 
agement. In  1832,  the  then  governor  stated  to  the  committee  of  the 
House  of  Commons,  that  he  thought  the  bank  should  be  a  bank  of  cir- 
culation and  of  deposit,  and  only  occasionally  a  bank  of  discount.  But  the 
act  of  1844  placed  the  bank  in  a  new  position,  and  led  to  the  adoption 
of  new  principles.  Formerly  the  bank  had  invested  her  surplus  funds  in 
government  securities.  But  when  she  purchased,  the  price  advanced ; 
and  when  she  sold,  the  price  fell.  This  produced  a  fluctuation  inconve- 
nient to  the  public.  Often,  too,  she  purchased  when  the  price  was  high, 
and  sold  when  the  price  was  low  ;  and  thus  sustained  loss.  It  was  there- 
fore deemed  preferable  to  invest  a  portion  of  her  reserve  in  the  discount 
of  bills.  The  sums  thus  invested  would  return  as  the  bills  fell  due,  and 
the  reserve  could  at  any  time  be  strengthened  by  checking  the  dis- 
counts. 

The  directors  having  determined  to  invest  a  portion  of  their  funds  in 
discounts,  it  became  necessary  to  reduce  their  rate  of  interest  to  nearly 
the  market-rate,  or  they  would  have  got  no  bills. 

An  eminent  London  banker,  distinguished  by  his  support  of  the  act  of 
1844,  says,  —  "  If  the  bank  is  to  continue  as  a  large  discounting  body 
(of  the  expediency  of  which  I  entertain  considerable  doubts),  I  think  it 
very  desirable  that  its  rate  of  interest  should  conform  to  the  real  market 
value  of  money."  ,  (Lords,  1632.)  The  directors  seemed  to  think  it 
necessary  that  they  should  in  some  way  employ  their  reserve,  in  order  to 
prevent  the  too  great  accumulation  of  bank  notes  in  the  issue  department. 
(Commons,  3009.)  We  here  give  no  opinion  as  to  the  best  way  of  em- 
ploying the  bank's  reserve,  but  we  are  quite  ready  to  admit,  as  the  gov- 
ernor admits  in  reply  to  a  question,  that  "  the  true  principles  of  banking 
are,  first,  that  a  bank  shall  never  place  itself  in  such  a  position  as  that 
it  shall  be  unable  to  meet  its  liabilities ;  and  next,  that  it  shall  employ  the 
whole  of  its  resources  at  the  greatest  profit  that  it  can  with  reference  to 
prudence,  looking  to  its  reserve."  (Commons,  3722.) 

In  thus  coming  into  competition  with  the  money  dealers,  reducing  the 
rate  of  interest,  exciting  a  feverish  state  of  feeling  in  the  public  mind,  and 
giving  facilities  to  the  formation  of  companies  for  speculative  purposes, 
the  bank  directors  are  accused  of  having  violated  their  public  duties  as  the 
bank  of  the  government,  and  thus  sacrificed  the  interests  of  the  nation  to 

91 


A  Trtalitc  on  Bmting. 

the  interests  of  their  proprietors.     We  shnll  not  meddle*  with  this  question. 
tare  here  nothing  to  do  \vith  the  public  duties  of  the  bank  directors, 
ire  considering  the  hanking  department  ns  "  any  other  banking  con- 
cern.**    Generally  speaking,  Providence  1ms  BO  constituted  human  so- 

,  that  all  banking  companies,  and  all  individuals  too,  will  most  « 
tuafly  promote  the  public  interests,  whrn  hy  honorable  means  they  pro- 
mote their  own.  If  this  in  not  the  case  with  the  Bank  of  England,  it 
must  hare  arisen  from  the  acts  of  the  Legislature  ;  and  the  fact  —  if  it  be 
a  fact  —  b  presumptive  evidence  npiinst  the  wisdom  and  the  justice  of 
thoae  laws  by  which  she  was  placed  in  that  position. 

At  the  close  of  this  period,  we  find  that  the  London  discounts  had  in- 
creased from  ,£113,000  to  .£'2,365,000,  and  the  "City  Bonds,  &c.," 
bad  increased  from  £3,357,000  to  £4, 009 ,000,  owing,  it  is  presumed, 
to  the  purchase  of  railway  debentures.  The  circulation  of  the  issuing 
department  had  increased  from  £28,351,295  to  £28,953,300  (see  the 
Returns  at  the  end  of  this  section),  and  the  minimum  rate  of  interest 
charged  by  the  bonk  was  21  per  cent. 

II.  The  Administration  of  the  Banking  Department  from  September  6, 
1845,  to  September  5,  1846. 

During  this  period  there  were  three  alterations  in  the  minimum  rate  of 
interest  On  October  16th,  1845,  it  was  raised  from  24  to  3  per  cent. ;  on 
November  6th  to  3J  per  cent. ;  and  on  August  17th,  1846,  it  was  again  re- 
duced to  3  per  cent.  In  fixing  the  rate  of  discount,  the  directors  took 
into  account  the  amount  of  bullion  in  the  issue  department,  the  reserve  in 
the  banking  department,  and  the  amount  of  the  discounts.  The  amount 
of  bullion  virtually  regulated  the  other  two ;  and  thus  the  interest  was  gov- 
erned by  the  foreign  exchanges.  At  the  same  time,  the  directors,  as 
practical  bankers,  would  pay  the  greatest  attention  to  their  reserve,  as  it 
was  only  from  this  source  that  any  advances  could  be  made.  Hence, 
sometimes  one  object  of  raising  the  rate  of  discount  was  to  diminish  the 
number  of  applications.  It  was  thought  better  to  protect  the  reserve  by 
raising  the  rate,  than  by  positively  refusing  to  discount. 

In  the  beginning  of  1846,  a  circumstance  occurred  which  increased  both 
the  deposits  and  the  discounts  of  the  bank,  and  added  greatly  to  her  profits. 
The  railway  companies,  who  were  desirous  of  obtaining  acts  of  Parliament 
to  authorize  the  construction  of  their  lines,  were  required  to  pay  into  the 
Bank  of  England,  within  fourteen  days  of  the  meeting  of  Parliament,  ten 
per  cent,  on  the  estimated  amount  of  their  capital,  to  be  returned  when 
the  company  had  obtained  the  act,  or  when  the  application  had  been  re- 
jected. Every  body  wondered  beforehand  how  so  large  a  sum  could  be 
paid  out  of  the  amount  of  notes  then  in  circulation.  But  the  bank  acted 
with  the  railway  deposits  as  she  had  been  accustomed  to  act  with  the 
public  deposits  previous  to  the  payment  of  dividends.  As  fast  as  the 
money  came  in,  it  was  lent  out ;  and  thus  a  transaction  of  large  magnitude 
was  effected  without  much  difficulty.  This  shows  the  importance  of  a 
government  bank.  Had  the  deposits  been  required  to  be  lodged  in  the 
exchequer,  and  there  to  remain  until  reclaimed  by  the  railway  companies, 
the  operation  could  not  have  been  effected.  The  bank  could  have  per- 
formed h  with  greater  facility  previous  to  the  passing  of  the  act  of  1844. 

92 


The  Bank  of  England. 

She  could  then  have  lent  out  her  notes  before  the  lodgments  were  re- 
quired to  be  made  ;  there  would  have  been  no  previous  apprehensions,  nor 
any  tightness  during  the  operation. 

III.  The  Administration  of  the  Banking  Department  from  September 
the  5th,  1846,  to  September  the  4th,  1847. 

In  September,  1846,  the  minimum  rate  of  discount  was  3  per  cent. 
On  January  the  14th,  1847,  it  was  raised  to  3|  per  cent.,  and  on  the  20th 
of  the  same  month  to  4  per  cent. ;  on  April  the  8th  to  5  per  cent.,  and  on 
the  5th  of  August  to  5£  per  cent. 

During  the  whole  of  this  period  the  foreign  exchanges  were  unfa- 
vorable, and  the  circulation  of  the  issuing  department  declined  from 
.£29,760,870  to  .£22,396,845.  (By  deducting  £  14,000,000  from  this 
sum,  we  see  the  amount  of  gold  and  silver  bullion  on  hand  in  the  issue 
department. )  This  was  attended  by  a  decline  in  the  reserve  of  the  bank- 
ing department,  and  an  increase  in  the  amount  of  loans  and  discounts. 

The  bank  directors  did  not  raise  their  rate  of  discount  above  3  per  cent, 
until  the  month  of  January,  1847.  For  this  they  have  been  severely  cen- 
sured by  parties  who  have  had  the  advantage  of  not  being  compelled  to 
form  any  opinion  until  after  the  result  was  known.  The  month  of  April  was 
an  important  month.  From  the  deficiency  of  the  harvest,  large  importa- 
tions of  corn  took  place.  These  imports  were  paid  for  in  gold,  which  was 
suddenly  withdrawn  from  the  issue  department,  for  exportation. 

Contemporaneous  with  this  export  of  gold,  the  government  required  to 
borrow  £  3,500,000  upon  deficiency  bills,  in  order  to  pay  the  dividends. 
Under  the  old  system  this  might  not  have  been  a  matter  of  much  impor- 
tance, but  the  case  was  different  under  the  act  of  1844.  The  banking  de- 
partment was  rather  in  danger  of  getting  into  what  the  Americans  call  a 
"  fix."  To  avoid  this  "  fix,"  the  directors  raised  the  rate  of  discount  to 
5  per  cent. ;  they  refused  to  led  money  even  upon  exchequer  bills ;  they 
limited  their  discounts ;  and  they  borrowed  £  1,275,000  on  consols. 
These  measures  caused  a  severe  pressure  on  the  money  market,  but  it 
soon  subsided.  From  this  period  the  foreign  exchanges  were  favorable 
to  this  country. 

The  operations  of  this  month  of  April,  1847,  have  given  rise  to  much 
discussion. 

The  advocates  of  the  act  of  1844  have  pointed  to  the  transactions  of 
this  month  to  prove  that  the  management  of  the  issue  department  cannot 
be  safely  intrusted  to  the  bank  directors.  They  say  that  if  the  bank  had 
advanced  its  rate  of  interest,  they  might  have  prevented  the  unfavorable 
course  of  exchange,  and  consequently  have  avoided  the  pressure  which 
then  occurred.  On  the  other  hand,  it  has  been  stated  that  the  bank 
ought  to  be  guided  in  its  rates  of  interest  by  the  amount  of  its  reserve ; 
that  from  November,  1846,  to  April,  1847,  the  reserve  was  above  one 
third  of  its  deposits,  a  greater  reserve  than  any  other  bank  would  think  it 
necessary  to  keep ;  that  the  demand  for  gold  was  so  sudden,  and  for  so 
large  an  amount,  that  no  ordinary  rules  could  have  prevented  it ;  and 
even  had  it  been  prevented,  it  might  have  been  injurious  to  the  country, 
ns  it  would  have  checked  the  importation  of  corn,  which  was  then  required 
in  consequence  of  the  deficiency  in  the  harvest.  There  can  be  no  doubt, 

93 


A  Trealue  on  Banking. 

lhat,  under  the  act  of  1644,  m  sudden  exportation  of  gold  must  cause  a 
sudden  contraction  of  the  amount  of  notes  in  circulation.  This  "  self- 
acting  machine  "  acts  oy  jerks,  like  a  steam-engine  without  a  tK-uh.,i- 
and  its  advocates  look  to  the  banking  department  to  supply  the  fly-wh< •« -I, 
and  to  cause  the  machine  to  move  smoothly  and  equably.  It  may  be 
doubled  whether  the  banking  deportment  has  the  power  of  doing  this. 
when  this  is  not  done,  the  advocates  of  die  act  throw  the  blame  upon 
that  department  They  resemble  the  court  preceptor,  who,  when  tin- 
royal  pupil  did  any  thing  wrong,  inflicted  the  beating  on  his  fellow- 
student.  If  on  this  occasion  the  bonk  did  wrong,  it  may  be  feared  that  it 
was  her  court  connection  which  led  her  astray.  The  government  were 
then  negotiating  a  loan  of  eight  millions  for  the  relief  of  Ireland.  And 
M  there  was  a  feeling  in  the  court  that,  in  the  face  of  the  government  ne- 
gotiating a  loan,  it  would  be  on  act  of  want  of  courtesy  to  put  up  the  rate 
of  interest  immediately."  (Commons,  No.  3001.)  In  the  secret  history 
of  the  Bank  of  England  we  may  possibly  find  other  instances  of  similar 
faults.  But  if  on  the  present  occasion  she  was  influenced  by  such  consid- 
erations, she  did  not  act  "  like  any  other  banking  concern." 

The  events  of  April,  1847,  also  lead  us  to  remark  that  the  London 
bankers  never  vary  their  rate  of  discount  with  a  view  to  regulate  the  for- 
eign exchanges.  If  it  behoves  the  banking  department  to  do  this,  it 
has  certainly  to  perform  duties  which  are  not  considered  to  belong  to 
**any  other  banking  concern."  Nor  do  the  London  bankers  suddenly 
and  abruptly  stop  discounting  for  those  customers  in  whom  they  have 
OBlfidence.  Tii--  t'ri-i[ii<-nt  occurrence  of  such  susj.i-nsion  of  loans  and 
discounts  as  occurred  in  April,  1847,  would  form  on  insuperable  barrier 
to  the  banking  department  ever  acquiring  that  kind  of  business  which  is 
carried  on  by  the  London  bankers.  No  merchant  would  like  to  depend 
on  such  a  bank  for  the  means  of  making  his  daily  payments.  We  be- 
lieve, however,  that  most  mercantile  firms  that  have  a  discount  account 
with  the  Bank  of  England,  have  another  banking  account  elsewhere,  and 
some  have  also  accounts  with  the  large  bill-brokers. 

The  pressure  that  existed  in  April,  1847,  has  been  attributed  to  the 
publication  of  the  amount  of  the  bank's  reserve.  It  was  said,  and  said 
truly,  that  the  bonk  might  very  prudently  reduce  her  reserve  for  a  few 
days  below  the  average  amount,  knowing  that,  by  bills  falling  due,  or  by 
other  means,  she  would  soon  receive  a  sum  that  would  replenish  her  cof- 
fers. But  the  public,  seeing  only  the  amount  of  the  reserve,  and  knowing 
nothing  of  the  sums  about  to  be  received,  might  become  unnecessarily 
alarmed,  and  hence  a  panic  might  ensue.  Upon  this  ground,  some  par- 
ties questioned  the  policy  of  publishing  the  bank  accounts  in  thr-ir  present 
form.  But  the  remedy  for  this  is  not  to  suppress  the  returns,  but  to  cir- 
culate throughout  the  community  such  an  amount  of  knowledge  as  shall 
enable  them  to  judge  accurately  respecting  banking  affairs.  Other  par- 
ties, of  a  higher  class  than  those  we  denominate  the  public,  have  fallen 
into  erroneous  opinions  by  a  literal  adhesion  to  these  returns.  Almost  up 
to  the  time  of  the  suspension  of  the  act  of  1844,  it  was  contended  by 
— —  who  **sit  in  high  place*"  that  there  could  be  no  pressure  on  the 
—  since  there  were  then  more  notes  in  the  hands  of  the 
94 


The  Bank  of  England. 

public  than  in  former  seasons  when  no  pressure  existed.  And  before  the 
Parliamentary  committees  of  1847,  it  was  stated  by  the  governor  and 
deputy-governor  that  it  could  make  no  difference  to  the  public  whether  the 
bank  advanced  three  millions,  or  any  other  sum,  to  the  government  on 
deficiency  bills,  or  advanced  the  same  sum  in  loans  and  discounts  to  the 
commercial  classes,  inasmuch  as  the  returns  would  show  that  the  amount 
of  notes  in  circulation  would  be  the  same.  The  events  that  followed  the 
suspension  of  the  act  showed  the  fallacy  of  these  opinions.  It  was  shown 
that  the  amount  of  notes  in  the  hands  of  the  public  is  not  of  itself  a  cer- 
tain criterion  by  which  to  judge  of  the  amount  of  banking  facilities  en- 
joyed by  the  commercial  classes. 

IV.  The  Administration,  of  the  Banking  Department  from  September, 
1847,  to  September,  1848. 

During  this  period  the  minimum  rate  of  interest  was  advanced  from  5^ 
to  6  per  cent,  on  the  23d  of  September ;  to  8  per  cent.,  by  authority  of 
the  government  letter,  on  the  25th  of  October.  It  was  reduced  to  7  per 
cent,  on  the  22d  of  November ;  to  6  per  cent,  on  the  2d  of  December ;  to 
5  per  cent,  on  the  23d  of  December ;  to  4  per  cent,  on  the  27th  of  Janu- 
ary, 1848 ;  and  to  3^  per  cent,  on  the  16th  of  June. 

At  the  commencement  of  this  period  a  great  number  of  commercial 
houses  failed,  not  only  in  London,  but  also  in  Liverpool  and  Glasgow,  and 
other  large  places.  The  following  is  the  account  given  by  the  Governor 
of  the  bank  to  the  committee  of  the  House  of  Lords  :  — 

"  An  unprecedented  large  importation  of  food,  caused  by  a  deficient  harvest,  re- 
quired in  payment  the  export  of  a  large  amount  of  bullion,  to  the  extent  of  about 
£7,500,000,  from  the  coffers  of  the  bank,  and  probably  not  less  than  £  1,500,000  from 
other  sources,  —  together  £  9,000,000.  From  this  great  reduction  in  the  available  capi- 
tal of  the  country,  in  addition  to  the  still  larger  amount  invested  in  railway  expendi- 
ture, acting  suddenly  upon  a  previous  high  state  of  credit  and  excessive  speculation, 
arose  the  pressure  in  the  money  market.  There  was  an  abstraction  of  £  7,500,000 
from  the  bullion  held  by  the  bank,  and  consequently  a  diminution  in  the  notes  to  that 
extent."  (Lords,  12.) 

During  this  period  the  bank  acted  with  great  liberality.  The  following 
is  a  list  of  the  advances  made  between  the  15th  of  September  and  the 
15th  of  November :  — 

"  1 .  The  Bank  of  England  being  applied  to  by  a  very  large  firm  in  London,  who  had 
at  that  time  liabilities  to  the  extent  of  several  millions  sterling,  advanced  £  150,000  on 
the  security  of  debentures  to  that  amount  of  the  Governor  and  Company  of  the  Copper 
Miners  in  England,  and  thereby  prevented  them  from  stopping  payment ;  it  was  dis- 
tinctly understood  that  the  operation  was  for  that  purpose.  2.  The  bank  advanced 
£50,000  to  a  country  banker  on  the  security  of  real  property.  3.  On  the  urgent  rep- 
resentations of  several  parties  of  the  first  importance  in  the  city  of  London,  the  bank 
advanced  £120,000  to  the  Governor  and  Company  of  the  Copper  Miners,  on  the  guar- 
antee of  approved  names,  taking  at  the  same  time  a  mortgage  on  the  company's  prop- 
erty for  £270,000  to  cover  this  sum,  and  the  amount  of  £150,000  debentures  before 
advanced  upon ;  it  was  stated  that  the  stoppage  of  this  company  would  have  thrown 
ten  thousand  people  out  of  employment.  4.  The  bank  advanced  £300,000  to  the 
Royal  Bank  of  Liverpool,  on  the  security  of  bills  of  exchange,  over  and  above  their 
usual  discounts  to  this  bank.  This  advance  unfortunately  proved  inadequate,  and  the 
Royal  Bank,  having  no  more  security  to  offer,  stopped  payment.  5.  The  bank  assist- 
ed another  joint-stock  bank  in  the  country  with  £  100,000  on  the  security  of  bills  of 
exchange,  over  and  above  usual  discounts.  6.  The  bank  advanced  £130,000  on  real 
property  to  a  large  mercantile  house  in  London.  7.  The  bank  advanced  £  50,000  to 

95 


A  Treatuc  on  Banking. 

mercantile  hooM  on  the  guarantee  of  approved  names.  8.  The  bank  ad- 
1  £  50/WO  IPS  joint  Mock  issuing  bank  on  bills  of  exchange,  and  agreed  to  open 
•  disroant  account  with  the  aaid  bank,  on  condition  that  it  should  withdraw  its  \^ne*, 
but  the  joint-stock  bank  Mopped  payment  before  the  amuiRcmcnt  could  be  rumjili •!•  »1. 

9.  Ita  bank  advanced  £  13,ot M)  on  real  property  to  a  large  Sttablishmcnt  in  London. 

10.  The  bank  assisted,  sad  prevented  from  failing,  a  large  establi-hm. -m  in  l.n.-i-|.<  •.!. 
by  forbearing  to  enforce  payment  of  upwards  of  £  100,000  of  tlu-ir  m-< vpian..  -s,  mid 
engaging  to  give  farther  aid  if  required.    11.  The  bank  assisted  a  very  lurp-  joint- 
Mock  hank  in  the  country  with  advance*  on  loans  on  hill*  of  exchange  to  ih<>  extent  nf 
about  £ 800,000,  OTCT  and  above  usual  discounts.    12.  The  bank  advanced  .£  ion .<»» i 
to  a  country  banker  on  real  property.     !•'<•  The  bank  advanced  n  joint-stork  Imnk  in 
the  coantnr  X  200,000  on  the  security  of  local  bills,  besides  discount  im:  £60,000  of 
London  bills.     14.  The  bank  assisted  another  joint-stock  Imnk  in  tin-  country  with  mi 
advance  of  X  100,000  on  local  and  London  bills.     15.  The  Imnk  advanced  £  100,000  to 
a  large  SMrcsnriUi  boose  in  London,  on  approved  personal  security.    16.  The  hank 
•saisted  a  large  house  at  Manchester  to  resume  payment  by  an  advance  of  £40,000  on 
approved  personal  security.    17.  The  bank  advanced  £30,000  to  a  country  bank  on 
real  property.     18.  The  bank  assisted  many  other  houses,  both  in  town  and  country, 
by  advances  of  smaller  sums  on  securities  not  admitted  by  the  bank  under  ordinary 
circumstances;  nor  did  the  bank,  during  the  period  in  question,  reject  at  their  London 
ytaHishimiu  any  one  bill  offered  for  discount,  except  on  the  ground  of  insufficient 
security."    (  Comma**,  8645.) 

Some  of  those  advances  were  not  made  till  after  the  appearance  of  the 
government  letter  on  the  25th  of  October.  Up  to  that  dute  the  efforts  of 
the  bank  were  inadequate  to  allay  the  pressure,  while  they  largely  re- 
duced the  bank's  reserve.  On  Saturday,  the  23d  of  October,  a  deputa- 
tion from  the  London  bankers  waited  on  the  Government,  who  then  deter- 
mined to  suspend  the  act  of  1844  ;  and  on  the  same  day  gave  intimation 
of  their  intention  to  the  Bank  of  England.  On  Monday  morning,  a  letter 
appeared  from  Lord  John  Russell  and  the  Chancellor  of  the  Exchequer, 
authorizing  the  directors  of  the  Bank  of  England  to  enlarge  their  dis- 
counts and  advances,  and  promising  that  if  by  so  doing  the  existing  law 
should  be  infringed,  the  government  would  apply  to  the  legislature  for  a 
bill  of  indemnity.  The  letter  suggested  that  these  advances  should  not 
be  made  at  a  lower  interest  than  8  per  cent.  The  effect  of  this  letter  was 
immediate.  Confidence  was  restored,  the  hoarded  notes  were  brought 
into  circulation,  and  discounts  were  everywhere  readily  obtained.  From 
these  causes  no  infringement  of  the  act  took  place. 

The  state  of  the  bank  reserve  at  the  date  of  the  suspension  of  the  act 
occupied  the  attention  of  the  Parliamentary  committees.  On  Saturday, 
the  23d  of  October,  the  notes  on  hand  amounted  to  <£  1,547,270,  and  the 
coin  to  jf  447 ,246.  This,  it  should  be  remembered,  was  the  amount  at 
the  London  office  and  at  the  thirteen  branches  put  together.  At  the  same 
time  the  public  deposits  were  .£4,766,000,  and  the  private  deposits 
£8,58 1,000,  of  which  £  1,615,000  belonged  to  the  London  bankers.  The 
questions  put  to  the  governor  on  this  subject  seemed  designed  to  show  that 
the  bank,  no  far  from  being  able  to  assist  others,  was  not  in  a  condition  to 
meet  her  own  engagements.  But  the  governor  contended  that  the  amount 
of  the  reserve  should  be  taken  on  tlie  Friday  night,  before  they  were  ac- 
quainted with  the  intention  of  the  government  to  issue  their  letter.  The 
reserve  then  was  .£2,376,000.  The  directors  had  from  £2,000,000  to 
jf  2,500,000  of  stock  which  they  could  have  sold,  and  a  large  amount  of 
die  bills  they  held  fell  due  in  the  following  week.  From  these  sources 

N 


The  Bank  of  England. 

they  would  easily  have  increased  their  reserve.  On  the  other  hand,  some 
of  the  witnesses  declared  that  no  large  amount  of  stock  could  have  been 
sold,  and  that,  had  a  run  taken  place  on  the  London  bankers  such  as 
that  which  had  taken  place  on  the  banks  at  Newcastle,  the  bankers'  de- 
posits must  have  been  withdrawn,  and  the  Bank  of  England  itself  might 
have  been  placed  in  jeopardy. 

As  we  have  considered  in  a  previous  section  the  operation  of  the  act  of 
1844,  it  is  not  necessary  to  pursue  this  subject  any  further.  After  the 
government  letter  was  issued,  the  bank  still  continued  to  make  advances 
with  caution,  and,  with  the  view  of  not  infringing  the  act,  they  borrowed 
money  on  the  Stock  Exchange  at  seven  per  cent.,  though  they  had  the 
unlimited  power  of  issuing  notes. 

Soon  afterwards  the  gold  began  to  return,  and  money  became  abundant. 
From  the  high  rate  of  interest,  the  amount  imported  was  large  ;  and,  from 
trade  having  been  paralyzed  by  the  pressure,  the  demand  for  it  was  very 
small.  As  the  gold  increased,  the  bank  rate  of  interest  was  reduced. 
By  September  2d,  1848,  the  circulation  of  the  currency  department 
amounted  to  £  26,883,505,  and  the  bank  reserve  to  £  9,410,952. 

The  following  is  a  copy  of  the  official  returns  for  the  four  years  that 
have  passed  under  review.  To  show  the  further  progress  of  the  bank 
since  September,  1848,  we  have  added  the  returns  for  the  week  ending 
the  2d  of  February,  1849 :  — 

BANK  OF  ENGLAND  WEEKLY  RETURNS. 


Account,  pursuant  to  Act  7  and  8  of  Victoria,  cap.  82,  for  the  weeks  ending  as  follows. 
ISSUE  DEPARTMENT. 


Notes  Issued, 


1844,  1845,  1846,  1847,  1848,  1849, 

Sept.  7th.       Sept.  6th.       Sept.  5th.       Sept.  4th.        Sept.  2d.         Feb.  2i 

££££££ 
28,351,295       28,953,300      29,760,870       22,396,845       26,883,505      28,330,845 


Government  Debt,  11,015,100  11,015,100  11,015,100  11,015,100  11,015,100  11,015,100 

Other  Securities,    .  2,984,900  2,934,900  2,984,900  2,984,900  2,934,900  2,984,900 

Gold  Coin  and  Bullion,  12,657,209  12.982,591  13,057,997  7,373,815  12,177,567  13,828,773 

Silver  Bullion,    .    .  1,694,087  1,970,709  2,702,873  1,023,030  705,938  502,078 

£28,351,295  £28,953,300  £29,760,870  £22,396,845  £26,883,505  £28,330,845 

BANKING  DEPARTMENT. 


1844, 

1345, 

1846, 

1847, 

1848, 

1849, 

LIABILITIES. 

Sept.  7th. 

Sept.  6lh. 

Sept.  5th. 

Sept.  4th. 

Sept.  2d. 

Feb.2d. 

£ 

£ 

£ 

£ 

£ 

£ 

Proprietors'  Capital, 

14,553,000 

14,553,000 

14,553,000 

14,553,000 

14,553,000 

14,553,000 

Rest, 

3,564,729 

3,608,180 

3,864,479 

3,986,593 

3,826,382 

3,576,625 

Public  Deposits,*  . 

3,630,809 

6,474,705 

7,318,919 

7,722,704 

6,021,591 

3,922,307 

Other  Deposits,       . 

8,644,318 

8,507,213 

£,557,109 

6,791,373 

8,824,607 

11,328,544 

Seven-Day  and  other 

Bill*,     .       .       . 

1,030,354 

1,021,639 

935,830 

842,711 

1,016,921 

1,144,824 

£31,423,240  £34,164,787  £35,229,337  £33,896,381  £33,242,501   £34,525,300 


*  Including  Exchequer,  Savings  Banks,  Commissioners  of  National  Debt,  and  Dividend  Account*. 

i  97 


A  Treatise  on  Banking. 

IMA,  ISM,  184T,  1M'.  1849, 

a.pi*k      8-pcRK      fcpc4ih.       fepiu.       F.b  *. 

X  X  *  .£  X 

I4.U4.834  I3.4K.M3  W.961,731  11,698,340  W,4«,735  13.888,967 

7.SJM16  11,917.081  «,B3,6W  17,603,119  11,368,814  10.314.6M 

8.I7S.O*  M",M6  9,831,08*  4,189,830  8,784,796  9,f£3,460 

8S7,7«6  471,598  619,967  688.088  ftg.167  774,919 

£31,40^0  XHIM.787  X »,S»,337  £33,898,381   £33,!»«a,C01   £34,086,800 

We  have  thus  taken  a  review  of  the  first  four  years  of  the  proceedings  of 
the  Banking  Department  of  the  Bank  of  England.  Whatever  may  t><-  the 
future  operations  of  that  department,  this  portion  of  its  history  will  always 
be  interesting.  This  period  is  remarkable  also  as  containing  one  of  those 
monetary  cycles  to  which  we  must  always  be  liable  as  long  as  our  cur- 
rency M  regulated  by  the  act  of  1844.  Each  year  has  a  peculiar  char- 
acter. The  first  commenced  at  a  period  of  full  currency ;  money  was 
abundant  and  cheap,  the  minimum  of  the  bank-rate  being  2  j  per  cent. 
In  the  second  year  the  exchanges  fluctuated,  and  the  rate  of  interest  fluc- 
tuated also.  During  the  whole  of  the  third,  the  exchanges  were  unfavor- 
able ;  gold  was  exported,  and  the  rate  of  interest  advanced.  At  the  com- 
mencement of  the  fourth  year  came  the  pressure  ;  then  a  favorable  course 
of  exchange  brought  back  the  gold,  the  rate  of  interest  was  reduced,  and 
again  money  became  abundant 

This  period  is,  moreover,  important  as  an  indication  of  the  principles  on 
which  the  banking  department  will  hereafter  be  governed.  The  governor 
and  deputy-governor  were  examined  before  the  Parliamentary  committees 
in  March,  1848.  They  stated  that  they  approved  of  the  reduction  of  in- 
terest in  September,  1844 ;  but  they  expressed  regret  that  the  bank  had 
not  advanced  the  rate  of  interest  in  November,  1846,  and  that  they  suf- 
fered the  reserve  to  fall  so  low  in  October,  1847.  Should  these  sentiments 
be  acted  upon  in  future,  we  may  expect  that  the  "  banking  department " 
will  reduce  its  rate  of  interest  as  heretofore  ;  but  when  money  becomes 
scarce,  it  will  advance  its  rate  at  an  earlier  period,  and  be  less  liberal  in 
making  advances. 

The  following  question  was  put  to  the  governor  by  a  member  of  the 
committee  of  House  of  Commons :  — "  You  have  described  as  part  of 
the  operation  of  the  act  of  1844,  that  you  were  during  the  year  1847 
obliged  to  lend  consols  instead  of  notes,  on  account  of  the  limit  prescribed 
by  the  act ;  that  you  borrowed  on  consols  in  April ;  that  you  were  obliged 
to  raise  the  rate  of  interest  to  9  per  cent. ;  that  you  refused  loans  on  ex- 
chequer bills ;  that  there  was  a  pressure  in  April  and  a  panic  in  October ; 
and  that  Government  were  obliged  to  interpose  by  a  letter,  in  order  to 
protect  the  public  from  the  restrictive  effects  of  the  act :  Do  you  call  that 
a  satisfactory  history  of  any  system  ?  "  ( Commons,  3450.) 

We  must,  however,  distinguish  between  the  "  system  "  as  established 
by  the  act  of  Parliament,  and  the  administration  of  the  banking  depart- 
ment in  consequence  of  the  establishment  of  that  system.  We  have 
given  in  the  preceding  section  our  opinion  of  the  system.  But  the  ad- 

•  Including  DMd  Wtlfhl  Annuity. 
98 


Joint-Stock  Banks. 

ministration  of  the  Banking  Department  of  the  Bank  of  England  under 
the  system  has,  in  our  sober  judgment,  been  distinguished  by  a  high  de- 
gree of  both  wisdom  and  liberality. 

The  administration  of  the  banking  department  since  September,  1848, 
does  not  call  for  any  particular  remark.  We  have  had  the  usual  indica- 
tions of  the  first  stage  after  a  panic.  The  bullion  in  the  issue  department 
has  increased  from  £  12,883,505  to  £  14,330,845 ;  the  notes  in  reserve 
from  £  8,784,795  to  £  9,553,460.  Money  has  been  abundant,  and  the 
rate  of  interest  low.  On  the  2d  November,  1848,  the  bank  reduced  the 
minimum  rate  of  discount  to  3  per  cent.  This  would  probably  have  been 
done  at  an  earlier  period  but  for  the  political  aspect  of  the  continent. 
The  same  reason  possibly  has  induced  the  directors  to  maintain  the  same 
interest  to  the  present  time  (February,  1849),  although  this  appears  to  be 
an  abandonment  of  the  principle  adopted  in  the  year  1844. 


SECTION  X.  — THE  ADMINISTRATION  OF  JOINT-STOCK  BANKS, 
WITH  INQUIRY  INTO  THE  CAUSES  OF  THEIR  FAILURES. 

THE  chief  points  in  which  a  joint-stock  bank  differs  from  a  private  bank 
are,  the  number  of  its  partners,  the  permanency  of  its  capital,  and  the 
form  of  its  government.  A  private  bank  has  not  more  than  six  part- 
ners ;  a  joint-stock  bank  may  have  a  thousand  partners.  If  a  partner 
in  a  private  bank  die,  or  become  insolvent,  his  capital  is  withdrawn  from 
the  bank ;  in  the  case  of  a  partner  in  a  joint-stock  bank,  his  shares 
are  transferred,  and  the  capital  of  the  bank  remains  the  same.  In  a  pri- 
vate bank  all  the  partners  may  attend  to  its  administration  ;  a  joint-stock 
bank  is  governed  by  a  board  of  directors.  The  business  principles  on 
which  these  two  kinds  of  banks  are  administered  are  the  same,  and  the 
observations  of  the  preceding  sections  will  equally  apply  to  both.  The 
topics,  therefore,  to  which  we  shall  in  this  section  more  particularly  direct 
our  attention,  will  be  those  that  have  a  special  reference  to  the  constitution 
of  joint-stock  banks.  We  shall  describe  these  banks  as  they  now  exist, 
and  then  notice  those  modifications  which  are  imposed  on  new  banks  by 
the  "Act  to  regulate  Joint-stock  Banks"  (7  and  8  Viet.,  cap.  113), 
passed  in  the  year  1844.  After  the  6th  of  May,  1844,  it  was  not  lawful 
for  any  new  company  of  more  than  six  persons  to  carry  on  the  trade  or 
business  of  bankers  in  England,  unless  by  virtue  of  letters  patent  to  be 
granted  by  her  Majesty  according  to  the  provisions  of  that  act. 

I.  All  joint-stock  banks  have  a  certain  amount  of  paid-up  capital. 

The  payment  of  a  certain  portion  of  the  capital  before  the  commence- 
ment of  business,  is  a  pledge  that  the  project  is  not  a  mere  bubble,  and 
this  is  especially  necessary  when  the  proprietors  have  no  further  liability. 
But  even  with  unlimited  liability  a  certain  amount  appears  to  be  neces- 
sary. The  employment  of  capital  judiciously  is  sometimes  a  means  of 
acquiring  business ;  and  in  case  of  loss,  there  should  always  be  a  suffi- 
cient capital  to  fall  back  upon  without  recurring  to  the  shareholders. 

99 


A   Treatise  on  Banking. 

There  is  an  evil  in  a  bonk  having  too  small  a  capital.     In  this  case,  the 
bank  will  be  but  a  small  bank ;  the  number  of  proprietors  will  be  few, 
and  the  number  of  person*  eligible  to  be  chosen  directors  will  IK*  I 
hence  there  will  not  be  the  same  guarantee  fur  good  inana^-m.-nt.     It  H 
bank  with  a  small  capital  have  also  a  v. TV  small  business,  it  hud  much 

!»•"•  I  •  •    •    H  an  in.!-  j-'ivii'iil  •  •xt.tKNlmii-nt,  anil  IM-CH inr  tin-  braii'-h  ot':i 

larger  bank.  If,  on  the  other  hand,  it  lias  a  large  business,  with  a  I 
circulation,  large  deposits,  and  large  loans  or  discounts,  its  losses  will 
sometimes  be  large,  and  hence  the  whole  capital  may  !*•  swept  a\\a\ . 
It  i*  true,  that  while  it  avoids  losses,  the  shareholders  will  receive  large 
dividends,  but  these  large  profits  had  much  better  be  left  in  the  bank  as 
an  addition  to  its  capital,  than  shared  among  the  proprietors  in  the  form 
of  dividends.  There  is  danger,  too,  that  the  high  premium  on  tlioso 
•hares  may  induce  many  shareholders  to  sell  out  and  form  other,  and  per- 
haps rival,  establishments. 

On  the  other  hand,  there  is  an  evil  in  a  bank  having  too  large  a  capital. 
In  this  case,  as  the  capital  cannot  be  employed  in  the  business,  the  direc- 
tors are  under  the  temptation  of  investing  it  in  dead  or  hazardous  securities 
for  the  sake  of  obtaining  a  higher  rate  of  interest ;  perhaps,  too,  they  may 
speculate  in  the  funds,  and  sustain  loss.  Hence  it  is  much  better  that  a 
bank  should  commence  business  with  a  small  capital,  and  increase  the 
amount  as  the  business  may  require. 

It  is  difficult  to  state  in  all  cases  what  proportion  a  capital  ought  to  bear 
to  the  liabilities  of  a  bank.  Perhaps  the  best  criterion  we  can  have  is  the 
rate  of  dividend,  provided  that  dividend  be  paid  out  of  the  business  profits 
of  the  company.  When  we  hear  of  a  bank  paying  from  fifteen  to  twenty 
per  cent  dividend,  we  may  be  assured  that  the  capital  is  too  small  for  the 
business.  The  liabilities  of  the  bank,  either  in  notes  or  deposits,  must  far 
exceed  the  amount  of  its  capital.  As  a  general  maxim,  the  greater  the 
capital  the  less  the  dividend.  Let  the  whole  capital  be  employed  at  any 
given  rate  of  interest,  say  three  per  cent.,  then  the  capital  raised  by  notes 
or  deposit,  produce,  after  paying  all  expenses,  a  certain  sum  as  profit. 
Now,  it  is  evident  that  if  this  amount  of  profit  be  distributed  over  a  large 
capital,  it  will  yield  a  less  rate  per  cent,  than  when  distributed  over  a 
small  capital.  Sometimes,  however,  a  large  capital  may  have  increased 
the  rate  of  dividend,  in  consequence  of  having  been  the  means  of  acquir- 
ing a  large  increase  of  business.  It  may  have  done  this  in  consequence 
of  inspiring  the  public  with  confidence  in  the  bank,  and  thus  inducing 
them  to  make  lodgments  or  circulate  its  notes ;  or  it  may  have  enabled 
the  bank  to  make  large  advances,  and  thus  gained  the  support  of  wealthy 
and  influential  customers. 

Although  the  proportion  which  the  capital  of  a  bank  should  bear  to  its 
liabilities  may  vary  with  different  banks,  perhaps  we  should  not  go  far 
astray  in  saying  it  should  never  be  less  than  one  third  of  its  liabilities.  I 
would  exclude,  however,  from  this  comparison  all  liabilities  except  those 
arising  from  notes  and  deposits.  If  the  notes  and  deposits  together 
amount  to  more  than  three  times  the  amount  of  the  paid-up  capital,  the 
bank  should  call  up  more  capital.  It  may  be  said,  that  the  hank  is  liable 
also  for  its  drafts  upon  its  London  agents,  and  for  the  payment  of  those 

100 


Joint- Stock  Banks. 

bills  which  it  has  indorsed  and  reissued :    admitted ;  but  in  both  these 
cases  the  public  have  other  securities  besides  that  of  the  bank. 

Presuming  that  banks  are  to  commence  with  a  moderate  amount  of 
capital,  and  to  increase  that  amount  as  the  business  increases,  the  question 
is  suggested,  what  is  the  best  way  of  increasing  the  capital  ?  The  Eng- 
lish banks  have  followed  two  ways  of  doing  this  ;  one,  by  a  further  issue 
of  shares  ;  and  the  other,  by  further  calls  upon  the  existing  shareholders. 
The  capital  of  all  the  joint-stock  banks  in  England  is  divided  into  certain 
portions,  called  shares ;  each  proprietor  holds  a  certain  number  of  these 
shares,  and  pays  a  certain  sum  upon  them.  If  he  wishes  to  transfer  a 
portion  of  his  capital  he  cannot  transfer  a  half  share  or  a  quarter  share, 
but  must  transfer  a  whole  share,  or  a  certain  number  of  shares.  Thus,  if 
the  capital  of  a  bank  be  £  500,000  it  may  be  divided  into  5,000  shares  of 
£  100  each,  or  50,000  shares  of  £  10  each,  and  a  certain  proportion  of 
the  amount  of  each  share  will  be  paid  up ;  and  this  proportion  is  called 
the  real  or  the  paid-up  capital.  Thus,  if  one  tenth  of  the  above  capital  is 
paid  up,  then  £  50,000  will  be  the  real  or  paid-up  capital,  and  £  500,000 
will  be  called  the  nominal  capital.  In  the  chartered  banks,  on  the  other 
hand,  there  is  usually  no  nominal  capital,  and  the  real  capital  is  not 
divided  into  shares  or  portions,  but  any  fractional  sum  may  be  trans- 
ferred. The  capital  is  then  called  stock.  When  there  is  no  nominal 
capital,  nor  any  way  of  increasing  the  amount  of  the  real  capital,  this  is 
the  best  way.  But,  in  the  other  case,  it  is  more  convenient  to  have  the 
capital  divided  into  shares. 

Some  persons  have  objected  altogether  to  a  nominal  capital ;  but  their 
objections  have  been  directed  more  to  the  misrepresentations  that  may  at- 
tend it,  than  to  the  thing  itself.  They  say,  "  a  bank  announces  that  it 
has  a  capital  of  £  500,000,  whereas  few  shares  are  issued,  and  but  a 
small  sum  is  paid  on  each  share ;  hence  people  are  misled,  and  the  bank 
acquires  a  confidence  which  it  does  not  deserve."  The  objection  here  is 
against  representing  the  nominal  capital  to  be  paid-up  capital ;  it  does  not 
bear  upon  the  principle  of  a  nominal  capital.  In  fact,  we  are  misled  by 
words.  What  is  called  nominal  capital,  is  nothing  more  than  a  further 
sum,  which  the  directors  have  the  power  of  calling  up.  If  this  sum  had 
not  been  called  capital,  it  would  not  be  objected  to,  as  it  could  lead  to  no 
misapprehension.  But  the  inquiry  simply  is,  ought  the  directors  to  have 
the  power  of  calling  upon  the  shareholders  for  a  further  amount  of  capital 
beyond  that  already  paid  up  ?  Were  they  not  to  have  the  power,  the 
bank  would  at  its  commencement  probably  have  too  large  a  capital,  and 
after  its  business  had  advanced  would  have  too  small  a  capital.  And  if 
the  bank,  by  any  unforeseen  occurrence,  became  involved,  and  should 
have  occasion  for  further  sums  to  extricate  itself  from  its  difficulties,  it 
could  not  make  any  further  call  upon  its  shareholders,  although  a  very 
small  advance  might  prevent  its  utter  ruin.  In  case  of  a  very  large  capi- 
tal, such  as  two  or  three  millions,  a  nominal  capital  may  not  be  neces- 
sary, as  so  large  a  sum  is  likely  to  be  in  all  cases  amply  sufficient.  But 
in  banks  of  a  second  class,  it  will  always  be  best  to  give  the  directors  the 
power  of  making  further  calls  upon  the  shareholders. 

The  second  way  of  increasing  the  capital  of  a  bank  is,  by  the  issue  of 
i»  101 


A  Treatue  on  Banking. 

new  shares.  The  whole  amount  of  share*  to  be  issued  is  fixed  in  tin-  fin 
instance,  and  the  bank  commences  as  soon  as  a  certain  proportion  l>n« 
been  issued.  If  the  bank  were  not  allowed  to  commence  business  until 
the  whole  of  the  shares  were  taken,  a  small  amount  would  !«•  ii\-  <l  upon, 
and  the  bank  would  be  proportional))  y  weaker.  Hut  by  beginning  with  a 
small  number  of  shares,  you  have  capital  enough  for  your  business,  and 
YOU  acquire  more  as  you  proceed.  Many  persons  will  join  a  bank  ut;<  r 
it  is  established,  who  would  not  take  shares  at  the  commencement.  Some 
shares  are  therefore  reserved  for  persons  of  this  description  ;  and  as  the 
shares  are  more  valuable  when  the  success  of  the  undertaking  is  no 
longer  doubtful,  they  are  often  given  out  at  a  premium,  and  always  a 
greater  degree  of  caution  is  exercised  as  to  the  persons  to  whom  tln-y 


Some  members  of  the  Parliamentary  committee  of  1836  appear  to  have 
an  objection  to  shares  of  a  small  amount;  they  apprehend  that  these 
shares  are  taken  by  an  inferior  class  of  persons  ;  and  hence  the  body  of 
proprietors  are  less  respectable.  But  it  would  appear  from  the  returns 
that  the  general  effect  of  small  shares  is,  that  each  shareholder  takes  a 
greater  number.  Thus  in  the  banks  of  £  100  shares,  each  proprietor  has 
taken  upon  an  average  twenty-eight  shares,  on  which  he  has  paid  the  sum 
of  £  444.  In  the  banks  of  £  20  shares,  each  proprietor  has  token  forty- 
three  shares,  and  paid  £  359.  In  the  banks  of  £  10  shares,  each  proprie- 
tor has  taken  fifty-two  shares,  and  paid  ,£400.  While  in  the  only  bank 
of  jf  5  shares,  each  proprietor  has  taken  117  shares,  and  paid  jC5H5.  It 
appears  to  me  that  the  chief  objection  to  which  small  shares  are  liable  is, 
that  they  do  not  admit  of  a  large  amount  of  nominal  capital.  The  banks 
of  £  5  and  £  10  shares  have  usually  the  whole  capital  paid  up  ;  and  hence, 
in  case  of  necessity,  the  directors  have  no  power  to  call  for  a  further 
amount  Could  the  Northern  and  Central  Bank  have  made  a  call  upon 
their  shareholders  of  £  5  per  share,  this  bank  might  have  been  saved  from 
destruction. 

According  to  the  new  act  above  referred  to,  no  bank  can  now  be 
formed  with  a  less  capital  than  £  100,000  ;  and  the  shares  must  not  be 
less  than  £  100  ;  of  which  10  per  cent,  must  be  paid  up  before  the  sign- 
ing of  the  deed  of  settlement  ;  and  all  the  shares  must  have  been  sub- 
scribed for,  and  half  the  amount  paid  up,  before  the  bank  commences 


II.  Joint-stock  banks  are  governed  by  a  board  of  directors. 

"  The  directors  are  chosen  from  among  the  shareholders  at  a  general 
meeting;  the  pecuniary  qualification  being  that  they  hold  a  stipulated 
number  of  shares  in  the  company. 

44  There  are  several  points  of  view  in  which  a  man  becomes  eligible  as 
a  director  of  a  bank,  independent  of  his  qualification  as  the  holder  of  the 
required  number  of  shares.  Indeed,  his  qualification  as  a  shareholder 
merely  must  not  be  taken  into  the  account. 

44  1.  He  ought,  in  the  first  place,  to  be  a  man  enjoying  public  confi- 
dence. Unless  he  is  a  man  whom  the  community  contemplate  as  de- 
serving of  their  confidence  and  esteem,  it  is  not  presumable  he  can  be  of 
much  service  to  the  bank,  either  by  his  influence  or  character.  The 

103 


Joint- Stock  Banks. 

public  are  not  likely  to  deposit  their  money  in  an  establishment  where 
they  cannot  place  the  fullest  reliance  upon  the  directors ;  and,  for  the 
same  reason,  parties  of  respectability  will  not  readily  be  induced  to  open 
accounts  with  the  bank. 

"  2.  He  ought  to  be  a  man  possessing  a  knowledge  of  commercial 
business.  It  is  a  matter  of  great  importance  to  the  satisfactory  and  effi- 
cient management  of  a  bank,  that  those  to  whom  is  intrusted  the  direction 
of  its  affairs,  be  in  some  measure  conversant  with  the  ordinary  affairs  of 
trade.  Men  who  are  retired  from  business  are  unquestionably  the  most 
eligible,  not  merely  from  their  business  knowledge,  but  because  they  are 
not  apt  to  be  contemplated  with  that  suspicion,  jealousy,  and  distrust 
which  tradesmen  will  sometimes  exercise  towards  such  directors  of  a  bank 
as  are  likewise  engaged  in  trade.  But  retired  men  of  business  are  not 
readily  to  be  had  as  directors  of  a  bank,  nor  are  they  in  most  cases  dis- 
posed to  accept  of  such  an  office.  Where  such  is  the  case,  men  of  high 
standing  and  character,  engaged  in  trade,  should  be  sought  for. 

"  3.  A  bank  director  should  be  a  man  of  strict  integrity  and  upright- 
ness. This  is  a  qualification  perfectly  indispensable  to  the  welfare  of  the 
bank.  He  must  be  above  all  trafficking  in  the  stock  of  the  company,  or 
taking  any  undue  advantage  over  the  other  shareholders  through  his  inti- 
mate knowledge  of  the  state  of  their  affairs  as  regards  the  bank.  He 
must  never  for  a  moment  forget,  that  while  he  is  a  partner  in  the  concern, 
and,  as  an  honest  man,  is  bound  to  conduct  it  in  as  faithful  and  diligent  a 
manner  as  he  would  his  own  private  affairs,  that  he  is  at  the  same  time 
appointed  to  a  solemn  trust,  in  having  the  interests  of  numerous  others, 
equally  interested  with  himself,  under  his  mangement  and  control.  In 
fact,  unless  the  director  of  a  bank  is  a  man  of  strict  integrity,  he  is  placed 
in  a  position  calculated  to  be  productive  of  great  mischief.  He  is  invest- 
ed with  power  to  ruin  the  fortunes  of  others,  and  to  inflict  much  com- 
mercial evil  upon  the  community.  Where  there  is  a  want  of  integrity, 
there  is  a  want  of  principle,  and  the  bank  must  necessarily  be  misman- 
aged. 

"  4.  A  bank  director  should  be  a  man  of  influence  and  respectability. 
He  ought  to  be  a  man  well  known  and  respected  in  the  district.  Such  a 
man  is  desirable  in  a  variety  of  ways.  He  adds  his  own  personal  respec- 
tability to  the  establishment,  and  he  influences  the  favor  and  support  of 
his  friends  and  acquaintances.  His  standing  in  society  gives  the  public 
confidence  in  the  establishment  with  which  he  is  connected,  and  they 
bring  their  money  and  business  to  its  support ;  the  paper  of  the  bank  be- 
comes more  readily  current  in  the  district,  and  the  weight  of  his  influence 
destroys  any  suspicion  of  its  stability. 

"  5.  A  bank  director  should  be  in  good  pecuniary  circumstances.  It 
would  be  a  most  wholesome  regulation,  were  it  stipulated  in  all  deeds  of 
settlement,  that  no  bank  director  should  be  privileged  to  overdraw  his  ac- 
count. The  great  facilities  which  directors  enjoyed  of  raising  money 
from  overdrawing  their  bank  accounts,  have,  in  some  instances,  resulted 
in  extensive  commercial  disasters,  and  in  the  total  wreck  of  large  estab- 
lishments. The  temptation  to  speculations  of  all  descriptions  which  such 
facilities  hold  out,  necessarily  increases  the  risk  of  the  bank,  and  induces 

103 


A    Trfatisf  on  Banking. 

a  leas  rigid  inspection  of  the  accommodation  afforded  to  other  customers. 
Where  those  who  are  intrusted  with  tlio  mnnngenm-nt  of  the  bank  forget 
the  extent  and  importance  of  tin-  trust  reposed  in  thmi,  and  l*^in  \<>  niter 
into  unwarrantable  speculations  with  tin-  funds  committed  to  tlieir  can-,  it 
is  not  supposablr  that  they  will  be  particularly  scrupulous  as  to  the  general 
management  of  the  affaire  of  others 

"6.  A  bank  director  should  1x3  one  who  can  bestow  some-  attention 
upon  the  affairs  of  the  establishment.  It  has  appeared  in  evidence  that 
gentlemen  have  been  appointed,  and  have  accepted  the  office  of  directors 
of  banks,  who  gave  little  or  no  attention  to  the  affairs;  who,  in  fact,  ap- 
pear to  have  considered  that  the  office  of  director  was  conferred  on  and 
accepted  by  them  more  for  the  purpose  of  complying  with  the  letter  of 
the  deed  of  settlement,  which  enjoined  the  appointment  of  a  certain  num- 
ber of  directors,  than  from  any  idea  of  their  being  expected,  or  of  its  be- 
ing necessary  for  them,  to  know  any  thing  regarding  the  management. 
The  consequence  of  this  has  been,  that  the  duties  which  the  shareholders 
devolved  upon,  perhaps,  six  individuals,  were  confined  to  two,  or  possibly 
only  one,  and  the  others  approving,  without  suitable  knowledge  or  proper 
inquiry,  of  all  their  acts,  the  moss  of  shareholders,  as  well  as  an  extensive 
commercial  circle,  have  been  involved  in  the  disastrous  results  of  misman- 
agement It  is  altogether  an  anomaly  that  any  man,  or  body  of  men, 
should  have  the  credit,  honor,  and  distinction  of  being  managers  and  di- 
rectors of  a  bonk,  and  yet  not  exercise  any  of  the  active  functions  and  im- 
portant duties  that  relate  thereto.  Upon  what  principle  can  they  undertake, 
as  by  accepting  the  office  they  unquestionably  do,  to  discharge  a  solemn 
trust,  in  faithfully  administering  the  affairs  of  a  bank,  into  which  they  make 
it  no  part  of  their  business  to  look  ?  Were  the  fact  not  very  well  known, 
it  would  seem  absurd  ;  yet  it  is  not  the  less  absurd  that  it  is  known/' 
(Philosophy  of  Joint- Stock  Banking,  by  G.  M.  Bell.) 

Mr.  Taylor,  in  his  "  Statesman,"  makes  the  following  observations 
upon  the  age  of  members  of  public  boards :  — 

"  Boards,  or  other  cooperative  bodies,  should  be  so  formed  that  youthfulness  and 
eldetiincM  mar  meet  in  due  proportion  in  their  counsels.  If  any  such  body  be  wholly 
composed  of  elderly  men,  it  will  commonly  be  found  to  be  ineffective,  so  far  as  inven- 
tion of  new  courses  and  intrepidity  of  purpose  are  required,  and,  perhaps,  also  unequal 
to  anr  unusual  amount  of  spontaneous  activity.  If,  on  the  other  hand,  it  !*•  composed 
wholfy  of  young  men,  its  operations  will  probably  bo  wanting  in  i>irvuiii>|x:ction  ;  and 
the  foresight  by  which  it  will  be  guided  will  be  too  keenly  iliiv.-fil  t<>  UK-  ><>>j«'ctt  of 
a  sanguine  expectation,  too  dully  to  prospects  of  eril  and  counteraction  The  respec- 
tive positions  in  life  of  the  young  and  the  old  operate  to  these  results  not  less  tlum 
their  temperaments  ;  for  the  young  hare  their  way  to  make,  their  reputation  to  earn, 
and  it  is  for  their  interest  to  be  enterprising,  as  well  as  in  their  nature;  the  old  have 
ascertained  their  place  in  life,  and  they  have,  perhaps,  a  reputation  to  lose." 

The  new  act  requires  that  provision  shall  be  made  in  the  deed  of 
partnership  "  for  the  retirement  of  at  least  one  fourth  of  the  directors 
yearly,  and  for  preventing  the  reelection  of  the  retiring  directors  for  at 
least  twelve  months." 

III.  Joint-stock  banks  have  a  principal  officer,  called  a  manager. 

"  The  prudent  and  satisfactory  management  of  a  joint-stock  bank  very 
materially  depends  upon  the  upright  and  consistent  discharge  of  those  so- 

104 


'  Joint- Stock  Banks. 

cial  duties  and  reciprocal  interchanges  of  confidence  which  ought  to  char- 
acterize the  directors  and  manager. 

"  The  manager,  from  his  experience,  and  the  importance  of  the  office 
he  fills,  is  entitled  to  the  kind  consideration  and  entire  confidence  of  the 
directors.  He  is  selected  by  them  to  occupy  an  arduous  and  highly  re- 
sponsible situation,  and  ought  to  be  rewarded,  not  merely  with  an  adequate 
pecuniary  remuneration,  but  with  the  respect  and  friendship  of  the  di- 
rectors, by  whom  he  should  be  considered  in  every  respect,  so  far  as  re- 
gards the  bank,  at  least  upon  an  equally  elevated  footing.  Without  the 
confidence  and  friendship  of  the  directors,  he  can  neither  take  his  place  at 
their  meetings  free  from  restraint,  discuss  with  them  matters  relating  to 
the  welfare  of  the  establishment  with  composure,  nor  appear  before  the 
customers  with  that  satisfaction  and  independence  which  is  required  to  the 
proper  discharge  of  his  duties.  Having  placed  him  in  the  position  of 
manager  of  the  bank,  it  is  their  duty  always  to  contemplate  him  in  that 
light,  to  respect  and  confide  in  his  opinions  and  conduct,  which  in  many 
cases  have  been  formed  by  long  years  of  active  and  arduous  employment 
in  the  profession ;  and  to  speak  well  of  him  among  their  friends  and  ac- 
quaintances. In  the  degree  in  which  the  manager  is  respected,  and  well 
spoken  of  by  the  directors,  will  respect  and  confidence  be  extended  to 
him,  and  consequently  to  the  establishment,  by  the  public,  and  a  good 
opinion  entertained  of  their  judgment  and  discernment  in  his  selection. 

"  The  conduct  of  the  manager  ought  to  be  characterized  by  great  cir- 
cumspection and  uprightness.  He  ought,  unquestionably,  in  every  in- 
stance, to  be  chosen  for  his  business  qualifications,  and  not  because  he  is 
a  rich  man,  a  gentleman,  a  man  of  fashion,  or  a  man  with  an  extensive 
circle  of  friends.  To  choose  him  on  account  of  any  one  of  these  qualifi- 
cations, and  not  principally  from  his  practical  experience  of  banking, 
would  be  similar  to  appointing  a  man  to  the  care  and  management  of  a 
steam-engine,  who  knew  nothing  of  its  mechanism,  nor  the  nature  of  its 
operation,  but  was  recommended  solely  because  he  had  a  taste  for  travel- 
ling ;  or  it  would  be  like  placing  a  man  at  the  helm  to  pilot  a  vessef  over 
quicksands,  and  through  a  reef  of  rocks,  who  knew  nothing  of  a  seafaring 
life,  but  was  fond  of  contemplating  the  grandeur  of  the  elements.  The 
manager  of  a  joint-stock  bank  ought  to  be  chosen  exclusively  for  his  ex- 
perience in  banking ;  other  qualifications  are  well  enough  in  their  own 
place,  but  ought  never  to  be  taken  into  consideration  in  choosing  a  person 
to  act  as  manager  of  a  bank.  In  this  way  a  stimulus  is  given  to  persons 
of  talent,  who  may  be  looking  forward  to  the  reward  of  a  life  of  toil  and 
drudgery  ;  and  thus  merit  is  patronized  and  protected.  In  a  well-regulated 
office  no  one  will  be  promoted  over  the  head  of  another,  but  a  prudent  se- 
lection being  made  at  the  outset,  a  system  of  regular  promotion  should  be 
uniformly  practised. 

"  The  manager  of  a  bank  may  be  contemplated  in  three  important 
points,  —  in  his  intercourse  with  the  customers  and  the  public ;  with  the 
directors ;  and  with  the  subordinate  officers  of  a  bank.  In  each  of  these 
departments  he  has  important  duties  to  perform.  He  must  be  scrupulously 
diligent  in  his  attention  to  the  affairs  of  the  bank,  courteous  in  his  inter- 
views with  the  public,  affable  and  unreserved  in  his  communications  with 

105 


A  Trtatite  on  Banking. 

the  directors,  and  kind  and  conciliating  towards  the  subordinates  of  the 
bank,  treat  in  £  thrm  as  those  who  may  he  «ne  day  placed  in  a  similar  situa- 
tion with  himself.  The  days  arr  now  gone  past  when  a  man  of  Ims-ness  wa« 
considered  in  the  light  of  a  machine,  n  more  automaton  for  tin-  purpose  of 
forming  figures  and  casting  up  accounts ;  but  it  is  still  n< •<•< -ssary,  enlarged 
as  our  views  of  the  powers  and  capabilities  of  tin-  human  mind  are,  in 
order  to  the  proper  management  of  any  business,  that  it  Iw  can Tu' 
tended  to.  The  manager  of  a  joint-stork  hank,  hein^r  allowed  a  compe- 
tent salary,  cannot  IK- justified  in  occupying  his  time  with  any  oilier  em- 
ployment which  may  (»ccasion  his  absence  from  the  duties  of  the  hank. 
But  it  is  not  intended  to  insinuate  that  he  must  be  a  man  of  one  idea,  and 
restrained  from  turning  his  mental  acquirements  to  his  own  amusement 
or  profit  This  would  be  as  absurd  as  it  would  be  unreasonable.  Nor  is 
it  meant  that  a  man  of  business  may  not  be  also  a  man  of  great  erudition, 
and,  it  may  happen,  of  literary  and  scientific  eminence.  On  the  contrary, 
it  cannot  be  denied  that,  in  the  present  day,  this  is  often  the  case.  What 
is  contended  for  is,  that  the  bank  is  entitled  to,  and  ought  to  have,  his 
close  and  chief  attention. 

As  it  is  obvious  that  he  cannot  manage  any  other  trade  or  profession, 
without  sacrificing  or  delegating  more  or  less  the  duties  he  owes  to  the 
bank,  it  seems  also  very  doubtful  whether  he  can  be  justified  in  taking  a 
prominent  part  in  public  or  political  affairs.  There  are  two  arguments 
against  his  being  a  public  character :  the  first  is,  that  he  may  be  drawn 
away  during  the  hours  of  business;  the  second,  that,  by  becoming  a  par- 
tisan, he  is  certain  of  being  more  or  less  obnoxious  to  a  portion  of  the  in- 
habitants, and,  it  may  be,  of  the  bank's  customers.  A  man  whose  mind 
is  occupied  in  framing  political  speeches,  in  promoting  political  schemes, 
and  whose  time  is  partially  given  to  political,  magisterial,  or  other  i\ 
ings,  cannot  possibly,  from  the  exciting  nature  of  such  subjects,  give  that 
cool,  deliberate,  and  uniform  attention  to  the  duties  of  the  bank  which  they 
necessarily  require. 

"  The  customers  ought  always  to  be  treated  with  civility  and  kindness, 
their  business  transacted  promptly  and  cheerfully,  and  every  inquiry  re- 
garding their  accounts,  or  any  matter  of  business,  readily  and  satisfac- 
torily explained.  When  an  accommodation  is  to  be  declined,  it  ought  to 
be  done  in  as  polite  and  inoffensive  a  manner  as  possible,  the  manner  of 
a  refusal  being  of  paramount  moment  to  the  character  of  a  man;; 

"The  shareholders,  being,  in  other  words,  the  proprietors  of  the  hank, 
are  to  be  received  with  that  freedom  and  confidence  which  is  due  to  their 
character  as  such,  but  without  compromising  or  revealing  to  them  either 
the  business  and  accounts  of  each  other,  or  of  the  customers  of  the  hank. 

"  Next  to  being  secret  and  cautious,  a  manager  ought  to  be  prompt  and 
decided  in  all  his  measures,  free  from  party  influence,  and  firm  in  his 
purpose.  A  habit  of  promptitude  and  decision  is  very  essential  to  the 
proper  regulation  of  the  business  of  a  bank,  and  acquired  by  forethought 
and  circumspection.  It  is,  perhaps,  a  constitutional  virtue  which  cannot 
be  enjoyed  by  every  one  in  the  same  degree,  but  it  is  nevertheless  a  vir- 
tue which  every  one  may  acquire  by  proper  attention.  Nothing  makes  a 
manager  look  more  silly  and  contemptible  than  a  hesitating,  dubious,  and 

106 


Joint-Stock  Banks. 

capricious  manner.  His  answer  ought  to  be  prompt  and  satisfactory ;  he 
should  be  sufficiently  acquainted  with  business  to  say  at  once  whether  an 
act  can  be  done  or  not,  and  should  appear  free  from  restraint,  and  not  dis- 
posed to  alter  an  opinion  when  once  formed."  (Bell's  Philosophy  of 
Joint- Stock  Banking.) 

IV.  In  joint-stock  banks  the  administrative  functions  are  usually  dis- 
tributed between  the  directors  and  the  manager. 

With  reference  to  both  private  and  joint-stock  banks,  the  distribution  of 
the  administrative  functions  is  a  most  important  topic  of  inquiry.  By 
what  parties  ought  these  functions  to  be  exercised  ?  We  have  spoken  of 
"  the  banker,"  as  though  a  bank  consisted  of  only  one  person,  and  this 
one  person  administered  all  the  powers  and  functions  of  the  bank.  But 
few  banks  consist  of  only  one  person.  One  class  of  banks  consists  of 
two,  three,  four,  five,  or  six  persons,  some  or  all  of  whom  attend  to  the 
practical  administration  of  the  bank.  Another  class  of  banks  consists  of  a 
great  many,  it  may  be  of  several  hundred  persons,  who  appoint  some 
dozen  or  score  of  their  own  number  to  administer  the  bank  on  their 
behalf. 

But  how  many  soever  the  number  of  partners  may  be  in  a  bank,  the 
administrative  functions  are  in  fact  practically  exercised  by  a  small  num- 
-ber  of  persons.  A  private  bank  may  consist  of  as  many  as  six  partners, 
but  it  is  rarely,  we  believe,  that  so  many  as  six  are  actually  engaged 
in  the  business.  When  more  than  one  are  thus  employed,  their  duties 
may  be  distributed  according  to  their  seniority  or  other  circumstances. 
In  ordinary  matters  there  may  be  a  division  of  labor,  and  each  partner 
may  preside  over  a  distinct  department  of  the  business.  But  in  all  im- 
portant cases  there  is  usually  one  leading  partner  who  practically  guides 
the  others.  When  a  bank  has  risen  speedily  to  eminence,  it  has  gener- 
ally been  through  the  talents  of  some  one  man.  It  does  not  follow  that 
this  one  man  did  not  receive  great  assistance  from  the  advice  or  sugges- 
tions of  his  partners.  It  is  the  part  of  a  wise  man  to  avail  himself  of  the 
knowledge  and  wisdom  of  others ;  and  he  will  often  gather  much  useful 
information  from  men  far  below  himself  in  general  talents.  There  is,  per- 
haps, more  uniformity,  consistency,  and  energy  in  the  proceedings  of  a 
bank  managed  by  a  few  partners,  than  by  many.  On  the  other  hand, 
banks  have  sometimes  been  ruined  by  placing  too  much  power  in  the 
hands  of  one  or  two  of  the  partners. 

In  a  joint-stock  bank,  though  the  number  of  directors  may  be  large,  the 
daily  exercise  of  the  administrative  power  is  practically  in  the  hands  of  a 
few  persons.  In  some  banks  this  power  is  vested  solely  in  the  manager ; 
sometimes  in  one  or  two  managing  directors  ;  sometimes  in  a  permanent 
committee  of  two  directors  and  the  manager ;  and  in  other  cases,  in  a 
changeable  committee,  on  which  each  member  of  the  board  takes  his  rota 
of  service  for  two  or  three  weeks  in  succession.  In  all  cases,  however, 
the  board  of  directors  lay  down  the  general  principles  on  which  the  bank 
is  to  be  administered  ;  reports  are  made  to  them  at  their  weekly  meeting, 
of  the  actual  condition  of  the  bank  in  all  its  departments,  and  all  very  im- 
portant matters  are  reserved  for  their  special  consideration. 

V.  Some  joint-stock  banks  have  many  branches. 

107 


A  Trtatitc  on  Banking. 

When  the  law  existed  in  England  that  no  bnnk  should  have  more  than 
nix  partner*,  the  branch  system  scarcely  «  \ist.-.i.  In  some  cases,  a  bank 
had  a  branch  or  two  a  few  miles  distant,  but  no  instance  occurred  of  a 
bank  extending  itself  throughout  a  county  or  a  district.  But  with  joint- 
stock  banking  arose  the  branch  system  ;  the  In •»<!  office  was  placed  in  the 
county  town,  and  branches  were  opened  in  the  principal  towns  and  vil- 
lages  around.  The  credit  of  the  bank  being  firmly  established,  its  notes 
circulated  freely  throughout  the  whole  district  The  chief  advantages  of 
this  system  are  the  following :  — 

There  is  greater  security  to  the  public.  The  security  of  the  whole 
bank  is  attached  to  the  transactions  of  every  branch ;  hence  there  is 
greater  safety  to  the  public  than  could  be  afforded  by  a  number  of  sepa- 
rata private  banks,  or  even  so  many  independent  joint-stock  banks. 
These  banks  could  have  but  a  small  number  of  partners,  the  paid-up  capi- 
tal and  the  private  property  of  the  partners  must  be  comparatively  small ; 
hence  the  holder  of  a  note  issued  by  one  of  the  independent  joint-stock 
banks  could  have  a  claim  only  on  that  bank  :  but  if  that  bank,  instead  of 
being  independent,  were  a  branch  of  a  large  establishment,  the  holder  of 
a  note  would  have  the  security  of  that  large  establishment ;  hence  the 
branch  system  unites  together  a  greater  number  of  persons,  and  affords  a 
more  ample  guarantee. 

The  branch  system  provides  greater  facilities  for  the  transmission  of 
money.  The  sending  of  money  from  one  town  to  another  is  greatly  fa- 
cilitated, if  a  branch  of  the  same  bank  be  established  in  each  of  those 
towns,  for  all  the  branches  grant  letters  of  credit  upon  each  other. 
Otherwise  you  have  to  ask  the  banker  in  the  town  from  which  the  money 
is  sent,  to  give  you  a  bill  upon  London,  which  is  transmitted  by  post ;  or 
vou  request  him  to  advise  his  London  agent  to  pay  the  money  to  the 
London  agent  of  the  banker  who  resides  in  the  town  to  which  the  money 
is  remitted.  This  takes  up  more  time,  and  is  attended  with  more  ex- 
pense. A  facility  of  transmitting  money  between  two  places  usually  fa- 
cilitates the  trade  between  those  places. 

The  branch  system  extends  the  benefits  of  banking  to  small  places 
where  independent  banks  could  not  be  supported  An  independent  hank 
must  have  an  independent  board  of  directors,  who  in  most  cases  will  be 
better  paid ;  the  manager  must  have  a  higher  salary,  because  he  has  a 
heavier  responsibility,  and  a  large  amount  of  cosh  must  be  kept  unem- 
ployed in  the  till,  because  there  is  no  neighbouring  resource  in  cose  of  a 
run.  There  must  be  a  paid-up  capital,  upon  which  good  dividends  are 
expected ;  a  large  proportion  of  the  funds  must  be  invested  in  exchequer 
bills,  or  other  government  securities,  at  a  low  interest,  in  order  that  the 
bank  may  be  prepared  to  meet  sudden  calls ;  and  the  charge  for  agencies 
will  also  be  more.  On  the  other  hand,  a  branch  has  seldom  need  of  a 
board  of  directors,  one  or  two  being  quite  sufficient ;  the  manager  is  not 
so  well  paid ;  there  is  no  necessity  tor  a  large  sum  in  the  till,  because,  in 
case  of  necessity,  the  branch  has  recourse  to  the  head  office,  or  to  the 
HMfhhmiriiifl  branches ;  nor  is  a  large  portion  of  its  funds  invest* -d  in  gov- 
ernment securities  that  yield  but  little  interest,  as  the  head  office  takes 
charge  of  this,  and  can  manage  it  at  a  less  proportional  expense.  Besides, 

106 


Joint- Stock  Banks. 

at  some  branches  the  manager  attends  only  on  market  days,  or  once  or 
twice  a  week.  The  business  done  on  those  days  would  not  bear  the  ex- 
pense of  an  independent  establishment. 

The  branch  system  provides  the  means  of  a  due  distribution  of  capital. 
Some  banks  raise  more  capital  than  they  can  employ ;  that  is,  their  notes 
and  deposits  amount  to  more  than  their  loans  and  discounts.  Others 
employ  more  capital  than  they  raise,  that  is,  their  loans  and  discounts 
amount  to  more  than  their  notes  and  deposits.  Banks  that  have  a  surplus 
capital  usually  send  it  to  London  to  be  employed  by  the  bill-brokers. 
The  banks  that  want  capital  must  either  restrict  their  business,  or  send 
their  bills  to  London  to  be  re-discounted.  Now,  if  two  banks,  one  having 
too  much,  and  the  other  too  little  capital,  be  situated  in  the  same  county, 
they  will  have  no  direct  intercourse,  and  will  consequently  be  of  no  as- 
sistance to  each  other  :  but  if  a  district  bank  be  established,  and  these  two 
banks  become  branches,  then  the  surplus  capital  of  one  branch  will  be 
sent  to  be  employed  at  the  other,  thus  the  whole  wealth  of  the  district  is 
employed  within  the  district,  and  the  practice  of  re-discounting  bills  in 
London  will  be  proportionably  diminished. 

The  branch  system  secures  a  better  system  of  management.  The  only 
way  to  secure  good  management  is  to  prevent  the  formation  of  small  banks. 
When  banks  are  large,  the  directors  are  men  of  more  wealth  and  respecta- 
bility ;  they  can  give  large  salaries  to  their  officers,  and  hence  can  command 
first-rate  talent ;  there  will  be  a  more  numerous  proprietary ;  and  in  a 
large  number  there  will  be  always  some  active  spirits  who  will  be  watch- 
ful of  the  conduct  of  the  directors  and  the  manager ;  besides,  in  a  numer- 
ous proprietary  there  is  a  greater  number  of  persons  eligible  to  be  direct- 
ors, and  consequently  there  is  a  wider  choice.  In  populous  cities,  such  as 
London  or  Manchester,  a  large  bank  may  be  formed  without  branches ; 
but  in  smaller  places  there  is  no  way  of  forming  a  large  bank  but  by 
giving  it  branches  throughout  the  district.  A  branch  bank  in  a  small 
town  will  probably  be  better  managed  than  an  independent  bank  in  the 
same  place.  The  directors  and  manager  of  the  branch  will  be  appointed 
by  the  directors  at  the  head  office,  assisted  by  the  general  manager,  who 
are  very  competent  to  judge  what  qualifications  are  necessary  for  these 
offices,  and  who  would  not  be  biassed  by  local  partialities.  But  the  di- 
rectors of  the  independent  bank  would  most  likely  be  self-appointed,  or 
chosen  by  the  proprietors,  because  no  others  could  be  obtained,  and  these 
directors  would  appoint  some  friend  of  their  own  to  be  manager.  The 
manager  of  the  branch,  besides  the  superintendence  of  the  directors, 
which  he  has  in  common  with  the  manager  of  the  independent  bank, 
will  be  subject  to  visits  from  the  general  manager  or  the  inspector ;  and 
he  must  send  weekly  statements  of  his  accounts  to  the  head  office.  The 
consciousness  of  responsibility  will  thus  secure  a  more  anxious  attention 
to  his  duties  ;  and  besides,  he  will  probably  be  looking  forward  for  promo- 
tion to  a  higher  branch  as  a  reward  for  his  successful  management. 
These  circumstances  seem  to  insure  a  higher  degree  of  good  manage- 
ment to  the  branch. 

At  the  same  time,  it  must  be  admitted  that  banks  with  numerous 
branches  require  a  proportionate  paid-up  capital,  and  that  the  capital  bo 
j  109 


Banking. 

kept  in  a  disposable  form ;  it  also  requires  vigilant  and  constant  inspec- 
lion,  and  a  rigid  system  of  discipline. 

A  proportionate  paid-up  capital  is  necessary,  because,  in  case  of  a  run, 
there  are  a  greater  number  of  points  of  attack;  hence  tin;  funds  must  be 
(I  to  inert  all  these  possible  attacks,  for  if  one  branch  bo  overpow- 
ered, the  whole  bank  b  immediately  ex|>"--'i  t<>  Mis|>icinn. 

Another  danger  arises  fn>m  the  incompctcncy  or  negligence  of  the 
managers  of  branches.  Among  a  number  of  men,  it  is  not  likely  that  all 
are  clever,  and  all  prudent ;  and  one  case  of  neglect  on  the  part  of  one 
manager  may,  in  times  of  alarm,  throw  discredit  on  the  whole  establish- 
ment Besides,  there  is  sometimes  danger  even  from  the  zeal  of  the  branch 
managers.  Each  manager  is  naturally  anxious  to  increase  the  business 
of  his  own  branch ;  and  he  will  perhaps  find  that  the  most  easy  way  of 
doing  this  is  to  extend  his  loans  and  discounts.  Hence  each  manager 
tries  to  employ  as  much  capital  as  he  can  ;  and  the  urgent  remonstrances 
he  receives  from  head  quarters,  requiring  him  to  restrict  his  discounts,  are 
either  evaded  or  delayed.  Thus  the  bank  proceeds  until  some  heavy  de- 
mand for  money  arises  at  head  quarters,  and  it  is  then  found  that  all  the 
capital  of  the  bonk  had  been  absorbed  by  the  branches.  These  advances 
cannot  bo  suddenly  recalled,  and  thus  the  bank  may  be  ruined. 

What  number  of  branches  a  bank  ought  to  have,  and  what  distance 
they  ought  to  be  from  the  head  office,  have  been  the  subject  of  much  dis- 
cussion. No  general  rules  can  be  given.  The  subject  may  very  safely 
be  left  to  the  discretion  of  the  banks  themselves.  Several  of  the  banks  in 
Scotland  have  from  thirty  to  forty  branches.  The  Provincial  Hunk  of 
Ireland,  whose  head  office  is  in  London,  have  branches  spread  ull  over 
Ireland.  I  am  not  aware  that  in  these  cases  any  danger  or  inconvenience 
has  been  experienced.  When  branches  are  found  troublesome  or  un- 
profitable, they  will  very  soon  be  discontinued.  In  some  instances,  even 
in  Scotland,  the  branches  of  the  larger  banks  have  been  withdrawn  in  con- 
sequence of  being  unable  to  sustain  a  competition  with  the  local  banks  of 
the  district. 

Had  the  act  of  1826  permitted  joint-stock  banks  of  issue  to  be  estab- 
lished in  London,  we  should  probably  by  this  time  have  had  ten  or  a 
dozen  banks  having  their  head  quarters  in  London,  and  extending  their 
branches  throughout  the  country.  But  as  the  law  prohibited  joint-stock 
banks  being  established  within  sixty-five  miles  of  London,  it  necessarily 
gave  rise  to  banks  occupying  particular  districts  in  the  country.  The  ad- 
vantages which  are  alleged  to  belong  to  the  district  system  are  the  follow- 
ing :  —  That  the  bank  will  be  better  adapted  to  the  wants  and  habits  of  the 
people ;  that  a  local  feeling  will  be  excited  in  its  favor,  hence  the  inhabit- 
ants of  the  district  will  take  shares,  and  the  occurrence  of  runs  upon  the 
bank  will  be  less  probable  ;  that  a  better  system  of  management  may  be 
expected,  as  it  can  more  easily  be  governed,  and  will  be  more  under  con- 
trol; that  a  panic  in  the  district  will  not  affect  the  other  parts  of  the 
country,  and  hence  supplies  may  be  more  easily  obtained  ;  that  banks  will 
be  of  a  moderate  size,  and  hence  will  be  attended  with  the  advantages 
arising  from  numerous  banks  acting  as  checks  upon  each  other,  in- 
of  a  few  large  banks  who  may  combine  for  objects  injurious  to  the  nation  ; 

no 


Joint- Stock  Banks. 

and  that  as  each  bank  will  have  an  agent  in  London,  the  bills  they  draw 
will  thus  have  two  parties  as  securities,  and  the  public  will  have  a  pledge 
that  there  is  no  excessive  issue  in  the  form  of  kites  or  accommodation 
bills.  On  the  other  hand,  it  may  be  contended,  that  in  Scotland  the  large 
metropolitan  banks  which  have  branches  extended  throughout  the  coun- 
try, have  generally  been  more  successful  than  the  provincial  or  district 
banks ;  that  there  is  a  greater  security  to  the  public  for  the  notes  or  de- 
posits ;  that  advances  are  not  so  likely  to  be  made  to  speculative  parties 
merely  on  account  of  their  local  influence  ;  that  the  capital  raised  in  one 
part  of  the  country  can  be  employed  in  another ;  that  the  transmission  of 
money  from  one  part  of  the  country  to  another  is  more  rapid  and  direct ; 
that  the  establishment  of  the  bank,  being  on  a  larger  scale,  you  have  a 
superior  class  of  directors,  and  can  command  the  services  of  higher  talents 
in  those  who  are  employed  as  officers. 

It  does  not  appear  that  these  two  systems  are  necessarily  at  variance 
with  each  other.  County  or  district  banks  have  no  doubt  many  advan- 
tages, but  .they  do  not  seem  to  supersede  banks  on  a  larger  scale. 

VI.  Joint-stock  banks  have  an  annual  meeting  of  shareholders,  to  whom 
is  usually  exhibited  a  balance-sheet  showing  the  assets  and  liabilities  of 
the  bank. 

All  banks  do  not  exhibit  a  balance-sheet.  The  practice  is  said  to  be 
open  to  the  following  objections  :  — 

1.  That  it  is  not  a  fair  criterion  by  which  you  can  form  any  judgment 
of  the  real  condition  of  the  bank.     You  might  see  that  the  bank  had  a 
certain  amount  of  securities,  or  had  advanced  a  certain  sum  upon  loans ; 
but  whether  those  securities  were  available,  or  whether  those  loans  could 
suddenly  be  called  up,  are  points  upon  which  the  balance-sheet  could  give 
no  information.     The  Agricultural  and  Commercial  Bank  of  Ireland  pub- 
lished a  very  satisfactory  balance-sheet  a  few  weeks  only  before  they 
stopped  payment. 

2.  It  lays  the  bank  open  to  attacks  from  its  rivals  or  opponents.     The 
balance-sheet  will  show  in  what  way  the  funds  of  the  bank  are  employed, 
but  it  will  not  state  the  reasons  why  they  are  so  employed.     The  oppo- 
nents of  the  bank  may  attack  every  item  of  the  balance-sheet,  and  the 
directors  may  not  be  able  to  repel  those  attacks  without  a  breach  of  con- 
fidence that  would  be  injurious,  to  the  establishment.     Suppose,  for  in- 
stance, the  balance-sheet  should  show  that  the  bank  had  advanced  a  few 
thousand  pounds  upon  mortgage.     This  might  be  justly  considered  as  a 
departure  from  the  sound  principles  of  banking ;  yet  it  might  in  this  case 
be  justified  by  some  peculiar  circumstances,  which,  nevertheless,  the  di- 
rectors could  not  publish  without  serious  injury  to  the  parties  concerned. 
The  production  of  a  balance-sheet  is  advocated  upon  the  ground  that  it 
would  enable  the  shareholders  to  judge  of  the  ability  and  prudence  of  the 
directors.     But  how  can  they  do  this  without  knowing  the  reasons  by 
which  the  directors  are  influenced  in  their  decisions  ? 

3.  It  causes  a  great  deal  of  speculation  in  the  shares.     The  sharehold- 
ers and  the  public  would  form  their  opinions  of  the  bank  from  the  state- 
ments in  the  balance-sheet ;  and  according  to  these  opinions  the  price  of 
the  shares  would  fluctuate  in  the  market.     Suppose  it  were  seen  that  the 

111 


A  Trtatue  on  Banking. 

bank  had  invested  a  large  portion  of  its  funds  in  government  securities, 
and  it  was  known  that  during  the  year  tin-  price;  of  those  securities  had 
experienced  a  considerable  fall,  would  not  the  hank  shores  immediately 
fall  too?  Again,  suppose  at  the  end  of  a  year  like  INM<>,  it  should  a |. pear 
that  the  bank  held  a  considerable  amount  of  overdue  hills,  the  apprehen- 
sion of  IOM  would  cause  the  bank  shares  to  fall;  soon  afterwards  these 
-  might  be  paid,  and  then  the  shares  would  rise  again.  Thus,  the  pub- 
lication of  balance-sheets  would  keep  the  prices  of  shares  in  perpetual 
fluctuation,  and  furnish  a  most  fruitful  source  of  speculation  and  gam- 
bling. 

4.  It  is  perfectly  inefficient  as  a  protection  against  fraud.  The  balance- 
sheet,  it  teems,  is  to  be  a  check  upon  die  directors,  and  yet  the  directors 
themselves  are  to  prepare  the  balance-sheet.  They  must  be  stupid  knaves 
indeed,  if  they  produce  such  a  balance-sheet  as  shall  expose  their  own 
knavery.  Besides,  the  balance-sheet  merely  shows  the  state  of  the  bonk 
on  one  day  in  the  year.  Would  it  not  be  easy  to  put  the  bank  on  that 
dav  in  such  a  condition  as  would  give  satisfaction  to  the  shareholders  ? 

VII.  At  the  annual  meeting,  the  directors  announce  the  amount  of  the 
profits  and  the  mode  of  their  distribution. 

The  first  appropriation  of  the  profits  is,  to  pay  to  the  shareholders  a 
dividend  on  the  capital.  But  all  the  profits  are  not  usually  thus  appro- 
priated ;  a  certain  portion  is  generally  retained  as  a  rest,  or  surplus  fund, 
or,  as  it  is  sometimes  called,  a  guarantee  fund.  This  last  title  has  led  to 
an  erroneous  impression  with  regard  to  the  nature  and  purposes  of  this 
fund.  It  is  not  designed  as  a  guarantee  to  the  depositors  for  the  amount 
of  their  deposits,  —  these  are  guaranteed  by  the  paid-up  capital  and  the  lia- 
bility of  the  shareholders,  —  but  as  a  guarantee  to  the  shareholders  for  the 
uniformity  of  their  dividends.  Should  the  profits  in  any  one  year  fall  be- 
low the  sum  necessary  to  pay  the  usual  dividend,  the  deficiency  may 
then  be  taken  from  the  surplus  or  guarantee  fund.  The  amount  of  this 
fund,  therefore,  will  be  regulated  by  the  amount  of  the  transactions,  and 
the  consequent  danger  of  loss.  But  it  sometimes  happens,  that,  after 
paying  a  liberal  dividend,  the  surplus  fund  accumulates  far  beyond  the 
sum  necessary  for  the  above  purpose.  In  this  cose  a  portion  of  the  fund 
may  be  employed  either  in  still  further  increasing  the  dividend,  or  it  may 
be  distributed  to  the  shareholders  in  the  form  of  bonuses,  or  it  may 
be  added  to  the  capital.  The  course  to  be  adopted  must  depend  upon 
circumstances.  When  the  capital  is  small,  it  will  probably  be  best  to 
make  an  addition  from  the  surplus  fund ;  but  when  the  capital  is  suffi- 
ciently large,  the  best  way  will  be  to  give  an  occasional  bonus  to  the  pro* 
prietors.  This  is  usually  better  than  increasing  the  dividend  ;  for  if  the 
dividend  be  once  increased,  the  same  rate  of  dividend  will  always  be  ex- 
pected ;  and  it  is  better  not  to  make  any  advance,  unless  there  is  good 
reason  to  believe  that  the  same  rate  will  always  be  maintained. 

When  urging  the  establishment  of  a  surplus' fund,  we  are  met  with  the 
remark,  that  we  are  not  bound  to  do  any  thing  for  posterity,  inasmuch  as 
posterity  have  done  nothing  for  us.  We  recollect  meeting  with  this  joke 
many  years  ago,  we  think  in  "Joe  Miller."  As  it  is  so  frequently  re- 
peated, we  presume  it  is  thought  to  be  witty.  \\  c  profess  not  to  be  a 

112 


Joint- Stock  Banks. 

judge  of  witticisms.  As  a  piece  of  reasoning  it  seems  very  unsound.  To 
deny  ourselves  present  gratifications  in  order  to  make  provision  for  the 
future,  is  one  of  the  most  important  lessons  that  reason  teaches  to  man. 
Nor  is  it  for  posterity,  in  the  present  case,  that  the  provision  is  made.  All 
bank  proprietors  should  wish  that  it  may  be  so ;  but  it  is  very  probable 
that  within  their  own  lifetime  some  untoward  events  may  occur  that  will 
require  a  portion  of  the  reserved  fund  to  keep  up  the  ordinary  dividend. 

Those  persons  are  under  a  mistake  who  object  to  a  reserved  or  surplus 
fund  on  the  ground  that  it  takes  away  the  profits  from  the  existing  share- 
holders, and  gives  them  to  the  future  shareholders.  This  is  not  the  fact. 
An  existing  shareholder  who  keeps  his  shares  until  the  fund  is  in  some 
way  distributed,  receives  of  course  his  portion  of  the  fund.  But  an  exist- 
ing shareholder  who  sells  out  his  shares  before  the  fund  is  distributed,  re- 
ceives the  value  of  his  portion  of  the  fund  in  the  price  of  his  shares.  The 
amount  of  the  surplus  fund  will  influence  the  market-value  of  the  shares. 
In  proof  of  this,  we  may  observe  that  after  a  bank  has  declared  a  bonus, 
the  market-price  of  the  shares  usually  falls,  as  in  fact,  cceteris  paribus, 
it  ought  to  do. 

We  consider  it  of  high  importance  that  a  bank  should  maintain  an  am- 
ple surplus  fund.  Without  such  a  fund,  the  dividends  will  fluctuate  very 
widely,  and  sometimes  there  may  be  no  dividend  at  all,  even  though  upon 
a  series  of  years  the  bank  may  have  been  very  successful.  Even  if  it  is 
known  that  a  bank  has  met  with  losses,  its  credit  is  not  so  much  affected 
when  it  has  an  ample  reserved  fund  to  fall  back  upon.  And  besides  the 
ordinary  losses  in  the  way  of  business,  a  bank  will  sometimes,  in  a  season 
of  pressure,  be  called  upon  to  sustain  loss  by  the  realization  of  securities, 
and  it  is  very  convenient  to  have  a  surplus  fund  sufficiently  ample  to  bear 
all  these  contingencies.  Such  a  fund,  too,  has  a  moral  effect  in  strength- 
ening the  reputation  of  the  bank  in  public  estimation.  It  is  regarded  as 
an  indication  that  its  affairs  are  governed  by  a  wise  and  prudent  adminis- 
tration. 

It  will  assist  us  in  forming  a  correct  judgment  as  to  the  principles  on 
which  joint-stock  banks  ought  to  be  administered,  if  we  take  a  view  of 
those  banks  that  have  fallen,  and  notice  the  causes  to  which  their  failure 
may  be  assigned.  In  investigating  these  causes,  we  shall  find  that  the 
disasters  which  have  befallen  joint-stock  banks  have  arisen,  not  from  any 
unsoundness  in  the  principles  of  joint-stock  banking,  but  purely  from  mal- 
administration. It  was  predicted  by  their  opponents  that  they  would  be 
ruined  by  the  excessive  issue  of  their  notes :  but  the  banks  that  have 
failed  have  been  chiefly  those  that  did  not  issue  notes.  It  was  stated  they 
would  be  ruined  by  carrying  on  an  extensive  business  with  a  small  capital ; 
but  among  the  banks  that  have  stopped  have  been  some  of  the  largest 
capital.  It  was  supposed  they  would  be  ruined  by  unprincipled  men  get- 
ting to  be  directors,  who,  having  no  property  of  their  own,  would  care 
little  about  squandering  the  property  of  others.  But  the  fallen  banks  are 
chiefly  those  which  were  governed  by  honorable  men ;  and  the  greatest 
sufferers  have  been  the  directors.  Nor  can  it  be  said  that  the  joint-stock 
banks  have  made  their  losses  by  engaging  in  speculations  unconnected 
with  banking.  Private  bankers  have  done  so.  But  joint-stock  banks  are 
j*  113 


A  Treatise  on  Banking. 

confined  by  their  deeds  of  settlement  to  the  business  of  banking.  Nor  has 
it  appeared  —  rvept,  |>< -rliajw,  in  the  Isle  of  Man  Bonk  —  tliat  they  ha\e 
violated  their  deeds  in  this  respect  Tu  what,  then,  must  \.  th»- 

failure  of  so  many  joint-stork  banks  ?     N\  ••  reply,  'I'.,  mal-administratum  ; 
<>r,  in  other  words,  to  bad  management     And  this  leads  us  to  in<|mn-.  In 
what  way  has  this  maladministration  been  exemplified  .;     \\  hat  an- 
erroneous  principles  that  have  led  to  these  fatal  results?     Withm 
temp'.in::  ;:Ue  them  all,  we  will  endeavour  to  specify  a  few  of 

• 

I.  Taking  the  unsound  business  of  other  banks. 

One  cause  of  the  rapid  extension  of  joint-stork  hanks  in  1836,  was  the 
"merging*'  of  numerous  private  hanks.  1  obtained  from  the  managers 
the  names  of  these  private  banks,  whieh  were  printed  as  an  appendix  to 
•.:  ••  "II  stof]  «f  Hanking  in  America,1'  published  in  1N.T7.  This  list  was 
afterwards  extended,  and  inserted  in  the  Hanker*1  Magazine,  for  1844. 
Thus  it  appears  that  one  hundred  and  thirty-fight  private  banking  estab- 
lishments have  merged  in  joint-stock  bonks.  Some  of  the  private  banks 
sold  their  business  after  the  joint-stock  banks  had  come  into  operation. 
Others  formed  a  joint-stock  bank  upon  the  private  bank,  the  senior  partner 
often  becoming  a  director,  and  the  junior  partner  the  manager,  of  the 
new  bank. 

In  by  far  the  majority  of  cases,  these  unions,  or  "  merges,"  were  ad- 
vantagcous  to  both  parties.  The  private  bankers  obtained  the  value  of 
the  business  they  had  surrendered,  and  an  interest  in  the  future  prosperity 
of  the  bank  they  bad  joined.  On  the  other  hand,  the  new  joint-stock  hank 
acquired  a  business  already  formed,  and  also  obtained  the  advantage  of 
the  practical  knowledge  and  superintendence  of  experienced  l«mi 

But  in  some  instances  the  bargain  was  a  disastrous  one  for  the  joint- 
stock  bank.  The  bad  and  overdrawn  accounts  were  taken  without  due 
examination,  and  soon  afterwards  occasioned  considerable  loss.  The  loss 
of  the  purchase-money  was  generally  by  far  the  smaller  loss  of  the  two. 
A  joint-stock  bank  in  the  West  of  England  purchased  a  private  bank  in  a 
country  town  for  a  large  sum,  and  took  the  overdrawn  accounts  without  a 
guarantee.  These  accounts  were  considered  good  at  the  time,  but  a  few 
years  afterwards  the  parties  failed,  and  the  joint-stock  bank  lost  consider- 
ably. A  joint-stock  bank  gave  to  the  Northern  and  Central  Hank  the.  sum 
of  £ 6,500  for  their  business  at  Leeds,  after  they  had  stopped.  The  :,,-. 
counts  they  took  over  were  afterwards  the  occasion  of  great  loss.  The 
Isle  of  Wight  Joint-stock  Bank  was  formed  upon  a  private  hank,  but  a  few 
months  only  had  elapsed  when  they  found  they  were  insolvent  from  the 
losses  that  would  arise  from  the  bad  accounts  they  had  accepted.  M 
immediately  determined  to  wind  up,  and  transfer  their  business  to  the 
National  Provincial  Bank  of  England.  Other  instances  might  be  adduced 
of  joint-stock  banks  having  been  founded  on  private  banks  which  are  now 
supposed  to  have  been,  at  the  time,  in  a  state  of  insolvency. 

II.  Some  banks  have  sustained  losses  by  making  advances  on  dead 
security. 

Instead  of  the  word  "  some,"  we  think  we  might  use  the  word  "  all " ; 
for  among  the  banks  that  have  failed  we  doubt  if  we  could  find  one  that 

114 


Joint- Stock  Banks. 

had  not  sinned  in  this  respect.  But  the  greatest  sinners  were  those  banks 
that  were  established  in  places  of  the  greatest  trade.  All  the  banks  at 
Newcastle  advanced  money  on  collieries,  and  also  on  other  public  works. 
The  banks  of  Manchester  made  advances  on  mills  and  manufactories,  as 
did  also  some  of  the  banks  at  Leeds.  These  advances  were  attended  with 
several  evil  effects.  In  the  first  place,  there  was  a  lock-up  of  capital, 
which  restrained  the  operations  of  the  bank.  To  relieve  themselves  from 
this  restriction,  they  took  bills  for  their  loans,  and  re-discounted  them  in 
the  London  money  market.  The  facilities  thus  obtained  induced  them  to 
extend  this  system  of  advance.  Bills  were  perpetually  renewed,  and  per- 
petually re-discounted.  At  last  a  pressure  came,  and  the  renewed  bills 
could  not  be  re-discounted.  The  bank  could  not  take  up  the  old  bills 
that  were  returned,  and  consequently  stopped  payment.  Sometimes,  too, 
the  bank  tried  to  relieve  itself  from  this  pressure  by  increasing  its  drafts 
on  its  London  agent.  It  has  for  a  long  time  been  the  practice  in  Lanca- 
shire to  pay  for  cotton  with  a  three  months'  banker's  bill.  Banks  in  diffi- 
culties avail  themselves  of  this  practice  to  make  all  their  advances  by 
drafts  on  London,  instead  of  cash.  The  Bank  of  Manchester  had  at  one 
time  an  enormous  circulation  of  this  kind. 

Another  effect  was,  that,  however  good  the  security  might  be  at  the  time 
the  advance  was  made,  when  a  change  took  place  in  the  state  of  trade,  its 
value  fell  much  below  the  amount  of  the  advance ;  and  in  some  cases  it 
could  not  be  sold  at  any  price.  But  the  evil  did  not  stop  here.  As  the 
property  given  as  security  would  have  been  worth  nothing  if  not  worked, 
the  bank  was  induced  to  make  further  advances  to  carry  on  the  works  on 
their  own  account.  A  colliery,  if  not  kept  in  operation,  soon  gets  out  of 
order ;  and  it  will  then  require  a  considerable  sum  to  set  it  at  work  again. 
Hence  some  of  the  collieries  at  Newcastle  were  worked  by  the  banks  ;  and 
mills  in  the  neighbourhood  of  Manchester  were  carried  on  in  the  same 
way.  The  plan,  however,  does  not  often  succeed.  It  is  generally  throw- 
ing good  money  after  bad.  The  ultimate  loss  is  usually  increased. 
We  may  just  observe  in  passing,  that  the  banks  in  the  East  Indies  get  in- 
volved in  the  same  way,  through  making  advances  on  indigo  works. 
These  works  are  of  no  value  except  kept  in  operation ;  and  hence  it  has 
occurred  that  a  bank  which  has  made  an  advance,  is  compelled  to  carry 
on  the  works  to  keep  up  the  value  of  its  security.  To  show  that  a  bank 
governed  by  the  strictest  rules  may  sometimes  be  drawn  into  transactions 
of  this  kind,  it  may  be  observed  that  at  the  present  time  an  iron  concern 
in  Wales  is  said  to  be  carried  on  by  the  Bank  of  England.  It  belonged 
to  the  Governor  and  Company  of  the  Mines  Royal.  The  bank  made  an 
advance  on  mortgage  to  this  corporation  during  the  pressure  of  1847,  and 
now  takes  the  profits  of  the  works.  Some  joint-stock  banks  have  made 
advances  upon  buildings.  This  has  occurred  chiefly  in  places  where 
there  has  been  an  increasing  population.  A  few  years  ago  a  joint-stock 
bank  in  a  town  of  fashionable  resort,  advanced  large  sums  to  builders 
upon  the  security  of  the  houses  they  were  erecting.  The  houses  did  not 
let ;  they  could  not  be  sold  for  any  thing  like  the  cost  price  ;  the  builders 
were  ruined,  and  the  loss  fell  upon  the  bank.  The  bank  had  recourse 
to  the  expedient  of  re-discounting  the  builders'  bills ;  but  after  a  while  it 

115 


A  Trtalitt  on  Banking. 

waa  compelled  to  stop  payment.  In  n^riruliurel  districts,  tanks  have 
aometimea  made  considerable  advances  to  farmers  and  graziers.  Indeed, 
it  is  alrmwt  a  universal  practice  to  do  so  at  some  seasons  of  the  \.-.-.r. 
These  advances  are  not  individually  uf  large  amount,  and  an-  not  usually 
attended  with  much  lorn,  —  nut  with  any  tiling  like  tlic  losses  incurred  t>y 
advances  on  collieriea,  mills,  and  houses.  But  it  is  a  lock-up  of  i-.-i[.it:,l 
until  the  year  cornea  round.  And  when  the  system  has  b«-en  earned  t-> 
loo  great  an  extent,  the  bank  has  become  embarrassed  through  the  want 

111.  Some  banks  have  lost  large  amounts  through  advances  made  l.y 
way  of  loan  or  discounts  to  men  engaged  in  speculative  undertakings. 

Two  of  the  banks  that  stopped  at  Newcastle-upon-Tyne  sustained  great 
loans  through  advances  to  corn-merchants.  Speculations  in  corn  are 
usually  carried  on  more  by  bills  than  by  loan.  A  merchant  buys  a  quan- 
tity of  corn,  and  places  it  in  the  hands  of  a  factor,  and  draws  bills  for 
something  under  the  market  value,  leaving  the  factor  a  margin  to  guard 
against  loss.  He  gets  these  bills  discounted,  buys  more  corn,  which  he 
also  places  in  the  hands  of  his  factor,  and  then  draws  fresh  bills.  'I Vis 
second  batch  of  bills  he  also  gets  discounted,  and  buys  more  corn ;  and 
thus  he  goes  on  in  the  same  course.  Now  if  he  thinks  the  market  will 
rise  (as  all  speculators  do),  he  will  not  allow  his  factor  to  sell  the  corn  ; 
but  when  the  first  bills  fall  due  he  will  renew  them,  and  with  the  produce 
of  the  new  bills,  when  discounted,  he  will  pay  the  old  ones.  It  is  thus  that 
a  large  speculation  may  be  carried  on  with  a  small  amount  of  capital  (and 
that  may  be  borrowed  from  the  bank),  and  all  the  speculation  is  kept 
afloat  by  bills.  These  bills  are  always  for  large  amounts,  and  when  the 
parties  fail  the  losses  are  usually  heavy.  The  failures  in  the  corn  trade 
in  1847  fell  heavily  on  the  banking  and  moneyed  interests.  It  was  the 
stoppage  of  Messrs.  Lesley,  Alexander,  dc  Co.,  the  corn  factors,  that 
caused  the  stoppage  of  Messrs.  Sanderson  &  Co.,  the  bill-brokers. 

Wool  is  another  "  heavy  article,"  as  it  is  called  ;  that  is,  it  costs  a  great 
deal  of  money,  and  the  bills  are  usually  for  large  amounts.  Occasionally 
there  is  much  speculation  in  this  article.  A  joint-stock  bank  that  failed 
in  Yorkshire  is  said  to  have  lost  large  sums  by  persons  engaged  in  this 
trade. 

Builders  are  generally  a  speculative  class.  Banks  that  advance  money 
to  parties  engaged  in  this  trade  have  usually  to  take  possession  of  the 
buildings.  We  have  already  noticed  an  instance  of  this  in  the  conduct  of 
a  joint-stock  bank. 

People  who  speculate  in  railway  and  other  companies  are  dangerous 
customers  to  a  bank.  A  joint-stock  bank  that  failed  at  Leeds  is  said  to 
have  lost  considerably  by  advances  to  share-brokers  and  others,  upon  the 
security  of  their  shares. 

It  may  be  remarked,  that  it  is  generally  bad  policy  in  a  bank  to  make 
a  very  large  permanent  advance  to  any  one  customer.  The  word 
**  large*1  is  a  relative  term,  and  must  be  undertsood  with  reference  to  the 
extent  of  business  that  the  customer  is  carrying  on,  and  to  the  means  of 
the  bank.  It  is  not  the  business  of  bankers  to  supply  their  customers 
with  capital  to  carry  on  their  trade.  But  it  is  their  business  to  make  tern- 

116 


Joint- Stock  Banks. 

porary  advances,  and  these  advances  may  sometimes  be  large.  In  such 
cases,  the  banker  should  have  a  kind  of  security,  that  shall  not  only  se- 
cure the  debt,  but  shall  prevent  its  becoming  permanent.  Almost  every 
bank  that  has  failed  can  point  to  some  one,  two,  or  three  large  accounts 
to  which  it  mainly  ascribes  its  failure.  The  temporary  stoppage  of  the 
Royal  Bank  of  Liverpool  is  attributed  to  an  advance  of  this  sort. 

But  the  worst  form  of  illegitimate  advance  is  that  which  is  made  by  a 
bank  to  one  of  its  own  directors.  Some  of  the  banks  at  Manchester 
sinned  grievously  in  this  respect. 

A  bank  that  is  known  to  act  imprudently  in  making  large  advances, 
will  occasion  a  suspicion  that  its  smaller  advances  are  made  with,  at 
least,  equal  imprudence.  A  large  number  of  imprudent  small  transac- 
tions may  be  as  fatal  to  a  bank  as  a  smaller  number  of  a  larger  amount. 
A  sum  which  appears  small  as  a  loan,  will  appear  large  as  a  loss.  A  man- 
ager who  accustoms  himself  to  examine  all  the  circumstances  connected 
with  the  small  bills  he  discounts,  will  acquire  a  habit  of  investigation  that 
will  guide  him  with  safety  in  dealing  with  large  transactions.  But  if  he 
get  into  a  laxity  of  manner  in  regard  to  small  amounts,  he  will  ultimately 
deal  less  carefully  with  large  sums,  and  be  in  danger  of  making  great 
losses.  In  every  case  the  rules  of  sound  banking  should  be  strictly  applied. 

IV.  Some  banks  have  become  involved  in  difficulties  through  a  general 
want  of  system  and  discipline  in  conducting  its  affairs.  This  laxity  usu- 
ally shows  itself  in  two  ways,  —  the  absence  of  a  good  system  of  book- 
keeping, and  the  want  of  a  proper  control  over  its  branches. 

We  could  not  adduce  a  more  striking  illustration  of  this  observation 
than  has  been  furnished  in  the  history  of  the  Agricultural  and  Commercial 
Bank  of  Ireland,  as  related  before  a  Committee  of  the  House  of  Commons 
in  the  year  1837.  The  following  are  extracts  from  this  evidence.  The 
books  at  the  head  office  had  not  been  posted  for  four  months.  There 
were  no  stock  books,  showing  the  amount  each  shareholder  had  paid  on 
his  share.  There  were  no  books  showing  the  amount  of  the  circulation. 
An  auditor  states :  "  They  showed  us  no  general  account ;  their  books 
were  in  a  perfect  chaos."  They  had  no  account  at  the  head  office  by 
which  they  could  check  any  transaction  at  the  branches.  Bills  were  sent 
away  to  be  re-discounted  without  any  entry  of  them  being  made  in  the 
bank  books.  At  the  branches  there  was  no  regular  system  of  accounts. 
At  no  one  branch  was  there  a  system  of  accounts  that  formed  an  ade- 
quate check  upon  the  amount  of  notes  in  circulation ;  "  and  from  one 
branch  we  were  told  that  returns  had  not  been  made  to  the  head-office  for 
fourteen  months,  and  from  another  for  six  weeks,  and  there  was  no  ques- 
tion about  it  from  the  head  office."  (It  is  to  be  feared  that  some  of  the 
English  country  banks  are  too  neglectful  in  regard  to  book-keeping.  See 
the  case  of  the  Honiton  Bank,  in  Burgess's  Circular  to  Bankers,  Feb- 
ruary 2,  1849.) 

We  will  not  intimate  that  any  thing  like  this  has  ever  existed  in  a  joint- 
stock  bank  in  England.  We  never  heard  that  any  one  has  had  any  diffi- 
culty in  making  out  a  statement  of  its  affairs.  With  some  banks,  how- 
ever, there  has  been  a  laxity  in  regard  to  the  government  of  their 
branches.  The  system  of  inspection  was  not  well  understood ;  the  re- 

117 


A  TVeolue  on  Banking. 

turns  from  the  branch  were  not  so  ample  as  they  should  have  been ;  mm 
the  order*  of  the  head  office  were  not  rigorously  enforced.  We  could 
mention  the  names  of  several  fallen  banks  that  lost  very  considerably  by 
tlu-ir  branches.  In  some  cases  the  banks  had  opened  brandies  in  towns 
that  required  an  amount  of  capital  disproportionate  to  the  means  of  tho 
bank,  and  their  administration  luul  been  intrusted  to  parties  who  h;nl 
neither  banking  nor  local  knowledge. 

A  good  system  of  book-keeping  cannot  be  too  highly  valued.  Its  ob- 
ject is  not  merely  to  secure  accuracy  of  accounts  between  the  bank  and 
its  customers.  A  further  object  is  to  classify  and  arrange  all  the  transac- 
tions in  such  a  way  as  easily  to  produce  a  weekly  balance-sheet,  showing 
the  actual  condition  of  the  bank.  Nor  must  it  be  supposed  Unit  such  ab- 
stracts or  balance-sheets  are  intended  merely  for  the  use  of  the  directors. 
They  are  of  the  utmost  use  to  the  manager,  and  should  be  the  subject  of 
his  constant  study.  A  manager  who,  day  after  day,  attends  only  to  indi- 
vidual transactions,  and  that,  too,  possibly  in  a  state  of  mental  excitement, 
may  involve  his  bank  in  difficulty,  even  though  each  transaction  may, 
upon  its  own  ground,  be  perfectly  justifiable,  unless  he  attends  to  those 
summaries  and  classifications  of  his  transactions  which  are  presented  in 
the  weekly  balance-sheet  He  will  there  see  on  one  side  the  means  of  the 
bank,  and  on  the  other  the  way  in  which  his  funds  are  employed.  He 
will  notice  if  his  loans,  or  overdrawn  accounts,  or  past-due  bills,  are  un- 
duly increased.  If  a  good  system  of  book-keeping  does  not  prevent  a 
manager  from  going  wrong,  it  will  prevent  his  going  wrong  without  know- 
ing it  If  he  act  unwisely,  his  balance-sheet  will  stare  him  in  the  face 
and  remind  him  of  his  faults. 

It  is  a  great  defect  not  to  take  an  accurate  estimate  of  the  losses  every 
half  year  before  striking  the  balance  of  profit  and  loss.  It  is  clear,  that 
common  sense  and  common  honesty  require  that  the  loss  should  be  taken 
into  account  as  well  as  the  profit  Yet  some  of  the  banks  that  failed 
went  on,  year  after  year,  exhibiting  a  balance-sheet  to  their  shareholders 
showing  a  respectable  profit,  which  enabled  the  directors  to  declare  a  fair 
dividend,  and  to  make  an  addition  to  the  reserved  fund.  While  the  an- 
nual balance-sheets  thus  showed  a  steady  increase  of  profit,  the  bad  debts 
had  actually  eaten  up  the  whole  of  the  capital. 

Another  defect  is,  not  to  have  an  account  in  the  general  ledger  show- 
ing the  amount  of  bills  re-issued  or  re-discounted.  The  amount  of  these 
bills  not  due  should  appear  on  both  sides  of  the  account,  —  on  one  side  as 
a  liability,  and  on  the  other  as  an  asset  For  want  of  doing  so,  some 
banks  have  not  been  able  to  ascertain  easily  what  amount  of  bills  they 
have  under  re-discount  But  it  is  important  to  know  this ;  for  it  may  be 
expected  that,  during  a  season  of  pressure,  no  small  portion  of  these  bills 
will  be  returned  unpaid,  and  the  bank  must  find  funds  to  take  up  its  in- 
dorsements. If  they  fail  to  do  this,  it  amounts  to  a  stoppage  of  pay- 
ments. In  (act,  the  amount  of  such  bills  suddenly  returned  has  in  some 
cases  been  the  immediate  cause  of  a  bank  stopping  payment 

We  hare  no  horror  of  numerous  branches.  When  we  see  that  in 
Scotland  the  largest  and  most  prosperous  banks  have  each  a  large  num- 
ber of  branches,  we  are  led  to  believe  that  branches  are  not  attended 

118 


Joint- Slock  Banks. 

with  any  dangers  which  cannot  be  overcome  by  wise  administration.  At 
the  same  time,  we  are  ready  to  admit  that  numerous  branches  require  a 
peculiar  mode  of  government,  and  a  rigid  system  of  discipline.  The 
chief  officer  of  such  a  bank  should  be  a  good  banker,  and  something 
more.  He  must  be  a  good  administrator ;  that  is,  skilled  in  the  adminis- 
trative department  of  good  government. 

In  the  first  place,  each  branch  must  have  a  good  system  of  book-keep- 
ing, and  the  system  must  be  uniform  at  every  branch.  Secondly,  Care 
should  be  taken  to  appoint  efficient  officers.  Thirdly,  A  code  of  laws  should 
be  drawn  up,  and  the  branch  manager  should  be  distinctly  informed  as  to 
the  extent  to  which  he  may  exercise  his  discretion,  and  what  cases  must 
be  referred  for  the  consideration  of  the  directors.  Fourthly,  Weekly  re- 
turns must  be  made  to  the  head  office  of  all  the  transactions,  and  a  half- 
yearly  balance-sheet  attended  with  full  supplementary  details.  Fifthly, 
Special  reports  should  be  occasionally  required,  as  special  circumstances 
may  occur,  either  with  reference  to  the  branches  generally,  or  with  refer- 
ence to  a  branch  individually.  Sixthly,  An  inspector  should  be  appoint- 
ed for  the  purpose  of  visiting  the  branches.  His  duties  will  be  to  explain 
the  instructions  of  the  directors,  and  to  see  that  they  are  properly  ob- 
served ;  to  maintain  a  uniform  system  of  transacting  business  at  all  the 
branches ;  to  instruct  the  officers  of  the  branch  in  their  duties  when  ne- 
cessary, and  to  communicate  the  knowledge  he  has  acquired  in  visiting 
the  other  branches ;  to  answer  any  difficult  or  knotty  questions  that  may 
be  proposed  to  him  by  the  manager,  and  to  consult  with  the  manager  as 
to  the  best  means  of  promoting  the  interests  of  the  branch ;  to  observe  the 
talents  and  capabilities  of  the  several  officers,  and  to  recommend  for  pro- 
motion any  who  seem  to  have  qualities  that  might  be  usefully  employed 
in  a  higher  department  in  the  bank.  In  large  banks  there  are  usually 
several  inspectors.  (We  shall  hereafter  notice  in  detail  the  mode  of  con- 
ducting business  in  the  Provincial  Bank  of  Ireland,  as  an  illustration  of  the 
above  remarks.) 

Branches  should  always  be  kept  in  strict  subordination  to  the  head 
office.  Prompt  obedience  to  orders  is  a  duty  that  must  be  rigidly  en- 
forced. The  chairman  of  the  Northern  and  Central  Bank  stated  to  the 
Parliamentary  committee,  that  at  some  of  the  branches  where  the  heaviest 
losses  had  occurred,  the  managers  had  not  obeyed  the  orders  they  had 
received  from  the  directors.  Similar  accusations  were  made  against  some 
of  the  branch  managers  of  the  Commercial  Bank  of  England.  It  is  quite 
impossible  for  any  bank  to  be  well  administered  as  a  whole,  if  every 
branch  is  allowed  to  exercise  an  independent  authority.  Upon  this 
ground,  some  parties  object  altogether  to  the  appointment  of  local  direct- 
ors at  the  branches.  A  local  board,  consisting  of  the  branch  directors 
and  the  manager,  are  more  likely  than  the  manager  alone  to  assume  in- 
dependent authority,  to  postpone  carrying  out  the  directions  they  may  re- 
ceive from  head  quarters,  and  to  take  upon  themselves  the  responsibility 
of  acting  somewhat  at  variance  with  the  strict  letter  of  their  instructions. 
And  although  local  directors  may  sometimes  be  useful  in  extending  the 
connections  of  the  bank,  or  in  aiding  the  managers  with  information  or 
advice,  yet,  for  the  above  or  other  reasons,  they  are  now  in  England  but 

119 


A  Treatise  on  Banting. 
t 

very  seldom  appointed.  The  branch  in  under  the  sole  care  of  a  manager. 
The  general  manager  of  tho  bnnk  is  not  merely  the  manager  of  ihe  head 
office,  Vat  has  authority  also  over  all  the  brandies.  Whenever  neces- 
sary or  expedient,  ho  issue*  cirrulnr  letters  of  instruction  to  the  branch 
manager*,  and  these  instructions  the  branch  managers  arc  expected  to 


V.  Some  hanks  have  been  unfortunate  in  consequence  of  having  made 
no  provision  to  meet  contingencies. 

This  class  of  banks  has  not  fallen  into  nny  of  the  practices  that  u>  h.i\< 
enumerated.  They  have  not,  on  the  whole,  been  badly  managed,  but 
they  have  traded  to  the  full  amount  of  their  means,  and  have  kept  no  re- 
j,  either  in  government  stock,  exchequer  bills,  or  bills  of  exchange,  to 
those  contingencies  to  which  all  banks  are  liable.  One  bank  of  this 
__  had,  during  the  railway  speculation,  received  from  some  of  these 
companies  a  large  amount  of  deposits.  A  portion  of  these  deposits  was 
lodged,  as  its  agent,  with  another  bank.  That  bank  stopped.  This  bank 
was,  consequently,  unable  to  pay  back  the  deposits  to  tho  railway  compa- 
nies. From  this  circumstance,  and  the  known  connection  between  the 
two  banks  having  damaged  its  credit,  it  was  compelled  also  to  stop  pay- 
ment. Another  bank  had  but  a  small  capital,  but  for  a  number  of  years 
it  was  exceedingly  well  managed.  In  1847  it  had  discounted,  and  again 
re-discounted,  a  large  amount  of  bills  on  a  first-rate  London  house  that 
failed.  The  London  house  afterwards  paid  20*.  in  the  pound.  But  the 
directors  concluded  from  this  circumstance  that  a  bank  with  a  small  capi- 
tal was  not  in  a  condition  to  bear  a  large  loss,  and  they  resolved  to  wind 
up  the  concern.  After  sustaining  the  losses  and  expenses  of  winding  up 
(and  in  such  a  case  some  losses  necessarily  occur),  the  bank  realized 
nearly  the  whole  of  its  paid-up  capital.  We  doubt  not  that  some  of  the 
other  banks  that  have  wound  up  their  affairs  have  done  so  from  causes 
similar  to  those  we  have  described. 

We  consider  that  this  head  of  our  inquiry  is  not  less  instructive  than  the 
four  by  which  it  was  preceded.  They  will  teach  us  the  vices  we  ought 
to  avoid  ;  thu  will  teach  us  the  virtues  we  ought  to  cultivate.  The  lessons 
we  here  gather  are,  that  we  ought  not  only  to  avoid  all  mismanagement, 
but  we  ought  also  to  provide  for  those  contingencies  to  which,  even  with 
good  management,  we  are  exposed.  We  ought  to  raise  our  capital  in 
proportion  to  our  business,  or  else  keep  down  our  business  to  a  level  with 
our  capital  ;  we  ought  to  have  a  surplus  fund  adequate  to  meet  any 
unforeseen  loss;  we  ought  to  have  a  reserve  of  convertible  securi- 
ties ready  to  meet  contingent  evils  ;  and,  finally,  we  ought  always  to 
keep  our  bank  in  such  a  condition,  that,  even  if  not  successful,  we  shall 
•till  be  in  a  condition  to  wind  up  our  affairs  without  inconvenience  to  the 
public. 

VI.  We  may  observe,  that  these  erroneous  principles  of  administration 
have  sometimes  been  the  result  of  a  defect  in  the  constitution  of  the  bank, 
of  the  appointment  of  incompetent  persons,  or  of  an  unwise  distribution  of 
the  administrative  functions. 

Joint-stock  banking  did  not  grow  up  gradually  in  England  as  in  Scot- 
On  the  introduction  of  this  system  into  England,  the  directors  were 

120 


Joint- Stock  Banks. 

necessarily  unacquainted  with  the  practical  operations  of  banking.*  For 
all  the  practice  and  experience  were  confined  to  the  private  bankers, 
whom  the  new  system  was  intended  to  .subvert.  In  some  places  there 
was  a  prejudice  against  directors  who  were  in  business.  Hence,  officers 
in  the  army,  barristers,  solicitors,  medical  men,  retired  tradesmen,  and 
country  gentlemen,  were  considered  as  the  most  eligible  directors.  These 
boards  of  directors,  all  of  whom  were  unacquainted  with  banking,  and 
some  of  whom  were  destitute  of  business  habits,  had  to  encounter  difficul- 
ties which  would  have  tried  the  most  experienced  bankers. 

The  want  of  experience  in  a  board  of.  directors  did  not,  however,  pro- 
duce any  dangerous  consequences  when  they  appointed  an  efficient  mana- 
ger. He  prudently  advised  and  instructed  them.  They  gradually  in- 
creased their  knowledge,  adopted  his  principles,  and  were  guided  by  his 
counsels.  By  their  daily  intercourse  with  him,  by  their  own  reflections, 
by  the  direction  given  to  their  thoughts,  and  by  the  experience  they  ac- 
quired, they  became  in  a  few  years  as  conversant  with  their  duties  as  the 
manager  himself.  We  believe  this  was  almost  uniformly  the  case  with 
those  joint-stock  banks  that  were  formed  within  five  or  six  years  after  they 
were  allowed  to  be  established  in  England.  As  a  proof  that  such  was  the 
case,  it  may  be  stated  that  the  greater  portion  of  the  banks  formed  during 
that  period  have,  at  the  present  moment,  the  same  managers  they  had  at 
their  commencement. 

But,  after  joint-stock  banks  were  started  as  matters  of  speculation,  they 
increased  more  rapidly  than  efficient  managers  could  be  found.  The 
new  banks  naturally  enough  looked  to  Scotland.  But  the  Scotch  banks 
had  the  sagacity  to  raise  the  salaries  of  their  principal  officers,  to  prevent 
their  emigration  to  England.  In  some  cases,  those  Scotchmen  who  were 
appointed  managers  of  English  banks,  had  never  held  office  in  a  bank  be- 
fore, or  else  it  was  an  office  so  inferior  that  all  they  knew  about  banking 
was  merely  the  routine  of  the  office.  Wherever  efficient  managers  were 
appointed,  whether  English  or  Scotch,  the  same  effects  were  produced  "as 
in  the  former  cases.  The  inexperienced  directors  acquired  the  knowledge 
and  experience  necessary  to  the  discharge  of  their  duties,  and  the  banks 
prospered.  But  sometimes  the  case  was  reversed.  The  manager  was 
inefficient  and  the  directors  inexperienced,  and  then  the  effects  were  dis- 
astrous. 

In  some  cases  the  manager  labored  under  an  inconvenience  from  being 
taken  from  a  lower  social  position.  Not  a  few  of  the  managers  were 
previously  bankers'  clerks ;  and  the  appointment  to  the  office  of  bank 
manager  did  not,  in  England  (as  it  does  in  Scotland  and  in  Ireland),  raise 
him  to  the  same  social  position  as  a  banker.  This  was  injurious  to  the 
bank  in  several  ways.  It  lessened  his  influence  with  his  directors.  From 

*  The  chairman  of  the  Northern  and  Central  Bank  gave  the  following  answers  to  a 
Committee  of  the  House  of  Commons :  — 

"  Is  there  any  one  of  your  colleagues  in  the  direction  of  the  bank  that  had  previous 
experience  in  banking  business  ?  —  I  do  not  think  there  was  one. 

"  Had  the  directors  of  the  joint-stock  banks  about  you  many  of  them  had  previous 
banking  experience? — I  do  not  recollect  one."  —  Committee  on  Joint-Stock  Bank*, 
1837. 

K  121 


A  Trcatite  on  Banking. 

the  days  of  Solomon  to  the  present  time,  the  degree  of  deference  paid  to 
even  good  advice  has  depended  upon  the  social  rank  of  the  party  who 
offered  it :  *4  Wisdom  is  better  than  strength  ;  nevertheless  the  poor  man's 
wisdom  M  despised,  and  his  words  are  not  heard."  (Ecclft.  viii.  16.) 
The  public,  too,  had  been  so  long  accustomed  to  private  hanking,  that, 
seeing  the  manager  paid  by  a  salary,  they  could  not  bring  their  minds  to 
view  him  as  the  banker,  but  considered  him  as  holding  an  office  analo- 
gous to  that  of  chief  clerk  in  a  private  bonk.  It  may  be  feared  that  in 
some  banks  the  directors  took  the  same  view,  and  thought  that  the  influ- 
ence and  the  salaries  of  the  two  offices  ought  to  correspond.  These  im- 
pressions have  now  passed  away. 

In  some  cases  the  manager  was  superseded  in  his  functions  by  the  ap- 
pointment of  managing  directors.  The  manager  was  a  man  of  banking 
knowledge  and  experience,  but  he  had  placed  over  him  a  couple  of  manag- 
ing directors  who  had  neither  knowledge  nor  experience.  Consequently, 
his  voice  was  never  heard  in  the  board-room,  and,  with  the  name  of 
manager,  he  acted  only  in  the  capacity  of  a  chief  clerk.  The  manager 
was  thus  deprived  of  the  opportunity  of  discharging  the  most  impor- 
tant of  his  functions,  —  that  of  giving  advice  to  the  directors,  —  and 
was  required  to  confine  his  attention  to  the  more  easy  duty  of  obedi- 
ence. 

In  other  cases  the  managing  directors  and  the  manager  formed  a  secret 
committee,  who  alone  were  acquainted  with  the  actual  condition  of  the 
bank.  The  directors  of  the  Bank  of  Manchester  stated,  in  their  first  re- 
port, that  "  two  of  their  body,  who  are  out  of  business,  alone  have  access 
to  the  accounts,  and  are  authorized  to  advise  with  the  manager,  when  re- 
quisite, on  the  current  transactions  of  the  bank.  At  the  same  time,  each 
of  the  other  directors  engaged,  individually,  to  refrain  entirely  from  in- 
specting any  of  the  customers*  bills  or  accounts;  thus  combining  all  the 
secrecy  of  a  private  bank  with  the  advantages  of  a  public  institution." 
The  Bank  of  Manchester  had  at  that  time  the  largest  paid-up  capital  of 
any  joint-stock  bank  in  England.  Three  of  its  directors  were  examined 
before  the  Bank  Charter  Committee,  in  the  year  1832.  They  presented 
to  the  committee  a  list  of  twenty-three  joint-stock  banks  then  formed,  and 
strongly  urged  that  measures  should  be  adopted  to  require  from  them  an 
adequate  amount  of  paid-up  capital.  It  is  somewhat  remarkable,  that,  out 
of  these  twenty-three  banks,  the  only  one  that  has  stopped  payment  is  the 
Bank  of  Manchester.  Another  has  ceased  to  exist,  but  it  was  by  a  trans- 
fer of  its  business. 

In  some  cases  a  bank  has  been  ruined  by  its  manager ;  in  others,  by 
the  manager  and  the  managing  directors  conjointly;  in  others,  by  the 
managing  directors  without  the  manager ;  and  in  others,  by  one,  two,  or 
three  directors,  who,  though  not  formally  appointed  managing  directors, 
have,  by  their  influence  with  the  board,  virtually  monopolized  that  office, 
and  discharged  its  functions.  It  may  be  questioned  whether  any  case  has 
occurred  in  England  of  a  bank  being  ruined  by  the  acts  of  its  whole 
board,  where  all  the  directors  were  honest  and  intelligent  men,  and  each 
was  accustomed  to  think  and  judge  for  himself. 

VII.  We  may  observe,  that  sometimes  joint-stock  banks  have  been  led 

122 


Joint- Stock  Banks. 

into  erroneous  principles  of  administration  by  the  proceedings  of  the  pro- 
prietors. 

The  constitution  of  joint-stock  banks  appears  theoretically  absurd. 
The  manager,  —  the  banker,  —  who  is  presumed  to  have  some  knowledge 
and  experience  in  banking,  is  placed  under  the  command  of  a  board  of 
directors  whose  knowledge  and  experience  are  supposed  to  be  inferior  to 
his  own.  These  directors  are  again  placed  under  the  control  and  instruc- 
tion of  a  body  of  proprietors  whose  knowledge  of  banking  is  much  less 
than  that  of  the  directors.  Practically,  however,  the  system  works  well. 
But  when  an  attempt  is  made  to  carry  out  the  theory,  the  effects  are  in- 
jurious ;  and  some  joint-stock  banks  have  fallen  into  danger  through  the 
operations  being  too  much  regulated  by  the  proceedings  of  the  pro- 
prietors. 

Sometimes  the  directors  have  been  influenced  by  the  applauses  of  the 
shareholders. 

,  It  is  natural  to  all  shareholders  to  wish  for  large  dividends  upon  the 
capital  they  have  invested.  Hence  they  applaud  most  loudly  those  direc- 
tors who  contrive  to  declare  the  highest  dividends,  to  make  the  largest  bo- 
nuses, to  keep  up  the  shares  at  the  highest  premiums  in  the  market,  and 
then  to  distribute  more  shares  at  par.  The  directors,  knowing  these  to  be 
the  feelings  of  the  shareholders,  very  naturally  attempt  to  gratify  them.  But 
those  transactions  that  yield  a  large  immediate  profit,  are  either  attended 
with  a  risk  of  loss  or  a  lock-up  of  capital.  But  the  profit  is  immediate, 
the  danger  is  remote.  With  the  applauses  of  the  shareholders  ringing  in 
their  ears,  the  directors  become  too  giddy  for  reflection,  and  recklessly 
engage  in  a  course  of  action  that  ends  in  ruin.  This  evil  is  increased 
when  there  are  two  joint-stock  banks  of  about  equal  strength  in  the  same 
place.  The  spirit  of  rivalry  is  natural  to  man.  The  competition  between 
the  two  boards  of  directors  is  not  which  bank  shall  be  governed  with  the 
greatest  prudence,  and  with  the  strictest  regard  to  sound  banking  princi- 
ples, but  which  shall  produce  the  most  glowing  reports,  which  shall  de- 
clare the  largest  dividends,  and  which  shall  keep  up  its  shares  at  the  high- 
est price  in  the  market.  A  strong  competition  is  carried  on,  which  ends 
in  the  destruction  of  one  or  both  of  the  rival  banks.  Such  feelings  are 
said  to  have  prevailed  at  Manchester ;  and  at  that  place  several  boards  of 
directors  were  presented  with  services  of  plate,  by  their  respective  share- 
holders, within  a  short  time  of  the  stoppage  of  their  banks. 

Sometimes  directors  are  induced  to  act  unwisely  from  the  censures  of 
their  shareholders. 

Every  one  who  knows  any  thing  of  banking  must  know  that  it  cannot 
be  carried  on  without  occasional  losses.  A  bank  that  is  so  conducted  as 
never  to  make  a  loss,  will  seldom  make  much  profit.  And  sometimes 
these  losses  will  be  so  great  as  to  absorb  a  large  portion,  of  the  profits  of 
the  year.  The  object  of  having  a  surplus  fund  is  to  provide  for  these 
contingencies,  so  that  the  usual  dividend  may  be  maintained.  But  when 
an  occasion  arises  for  making  use  of  a  portion  of  this  fund,  there  is  often 
what  is  called  "a  stormy  meeting,"  and  the  shareholders  walk  away 
sulky  and  dissatisfied.  This  produces  a  bad  effect  on  the  minds  of  the 
directors.  It  is  a  great  mistake  to  suppose  that  boards  of  directors  are  in- 

123 


A  TVwrtue  on  Banking. 

different  I*  l|0  applauses  or  censures  of  their  shareholders.  As  a  general 
rule,  the  fact  is  lamentably  the  reverse.  In  Home  cases  they  have  had 
so  much  dread  of  "  the  general  inn-ting "  that  they  could  not  muster 
courage  enough  to  make  honest  reports.  Had  they  done  so  in  the  first 
M^n^t  their  banks  might  have  been  saved  from  destruction. 

Sometimes  directors  are  in  danger  of  being  led  astray  by  the  admoni- 
tions and  instructions  of  their  shareholders. 

A  very  prudent  class  of  proprietors  exhort  the  directors  to  practise  the 
strictest  economy.  When  rightly  understood,  this  exhortation  is  worthy 
of  the  rounds  of  applause  with  which  it  is  usually  attended.  But  it  is 
liable  to  be  misunderstood.  In  banking,  as  in  housewifery,  the  lowest* 
priced  article  is  not  always  the  cheapest  The  largest  portion  of  the  ex- 
penditure of  a  bank  consists  of  salaries.  Hence  an  exhortation  to  econo- 
my amounts  to,  "  Keep  down  the  salaries  of  your  officers  "  ;  and  as  the 
manager  has  the  largest  salary,  he  will  most  likely  be  the  heaviest  suf- 
ferer. We  believe  that  if  the  suggestion  were  made  in  these  terms,  it 
would  receive  no  support  from  any  body  of  shareholders.  Were  it  cus- 
tomary to  announce  to  the  proprietors  the  advances  made  in  the  salaries 
of  the  managers,  we  think  the  announcement  would  be  received  with  the 
same  feelings  as  were  manifested  in  the  following  instance.  At  the  elev- 
enth annual  meeting  of  the  proprietors  of  a  bank  in  one  of  the  northern 
counties,  held  on  the  5th  of  February,  1846,  "  the  chairman  informed  the 
meeting  that,  appreciating  highly  the  services  of  the  manager,  and  the 
prosperity  of  the  bank  fully  justifying  them  in  doing  so,  the  directors  had 
raised  his  salary  to  £  1,500  a  year;  at  which  the  proprietors  present  ex- 
pressed their  hearty  concurrence.  And  it  was  recommended  to  the  di- 
rectors, by  the  proprietors  present,  still  further  to  augment  the  manager's 
salary,  with  the  increasing  business  and  prosperity  of  the  bank."  At  that 
time  the  paid-up  capital  of  the  bonk  was  £260,450.  In  the  "  Banking 
Almanac  for  1849,"  this  banking  is  stated  to  have  a  capital  of 
£300,000,  and  a  reserved  fund  of  £30,000. 

The  following  is  an  extract  from  the  sixth  report  of  another  joint-stock 
bank:  — 

"  The  manager  having  claimed  for  his  nominees  the  1,000  shares  at  par 
to  which  they  were  entitled  by  his  agreement  when  originally  engaged, 
the  same  have  been  issued  to  them,  which  increases  the  number  of  paid- 
up  shares,  entitled  to  participate  in  the  present  dividend,  to  32,080." 

A  more  mischievous  recommendation,  when  thus  understood,  can 
hardly  be  conceived.  Next  to  having  a  dishonest  manager,  the  greatest 
evil  is  to  have  one  that  is  badly  paid.  If  he  is  known  to  be  poor,  his  ad- 
vice will  have  less  weight  in  the  board-room ;  the  directors  individually 
will  treat  him  with  less  respect ;  his  wealthy  customers  will  not  disclose  to 
him  their  private  affairs ;  the  needy  class,  when  refused  discount,  will  in- 
sult him  by  threatening  to  complain  to  the  directors  ;  and  his  inferior  i.ili- 
cere  will  be  less  prompt  in  their  obedience.  But  worse  than  all  this  will 
be  the  effect  produced  upon  his  own  mind.  He  will  not  be,  and  he  cannot 
be,  so  efficient  a  manager  when  badly  paid,  as  he  would  be  if  he  received 
a  liberal  remuneration.  It  is  the  besetting  sin  of  men  of  business,  that 
they  never  pay  attention  to  mind,  though  among  no  class  are  mental  phe* 

124 


Joint- Stock  Banks. 

nomena  more  strikingly  exhibited.  The  amount  of  his  salary  is  the  only 
tangible  means  by  which  a  manager  can  judge  how  far  his  services  and 
his  character  are  appreciated.  It  is  not  the  money  alone,  but  the  feelings 
of  which  the  money  is  an  indication,  that  produces  an  effect  on  the  mind. 
It  is  a  law  of  our  nature,  that  the  kindness,  liberality,  and  generosity  of 
others  will  produce  corresponding  feelings  in  ourselves.  And  it  is  an- 
other law  of  our  nature,  that  when  the  mind  is  under  the  influence  of  such 
feelings,  it  is  capable  of  intellectual  efforts  of  a.  higher  order.  But  we 
forget ;  we  were  writing  about  pounds,  shillings,  and  pence,  and  our  pen 
has  darted  off  into  philosophy.  We  will  now  return. 

Sometimes  the  shareholders  fly  at  higher  game,  and  canvass  the  sala- 
ries of  the  directors.  Such  discussions  are  always  unpleasant,  as  they  are 
carried  on  in  the  presence  of  the  parties  interested.  Among  all  the 
charges  brought  against  the  directors  and  managers  of  banks  that  have 
failed,  we  have  never  met  with  the  accusation  that  they  received  exces- 
sive salaries.  We  are  tempted  to  fancy,  that,  had  their  salaries  been 
higher,  the  banks  might  not  have  failed.  As  far  as  salary  is  concerned, 
they  certainly  would  have  had  a  greater  interest  in  preventing  the  failure. 
In  some  banks,  however,  directors  have  paid  themselves  for  their  services 
in  ways  far  more  costly  to  the  bank.  Take  the  following  instance  :  — 

"  The  qualification  for  directors  of  the  Northern  and  Central  Bank  was  100  shares. 
It  was,  however,  ascertained  that  each  of  the  original  directors  took  1 ,000  shares,  and 
that  besides  these,  other  shares  were,  at  later  dates,  distributed  among  the  directors 
and  their  near  connections.  Instead  of  paying  the  calls  to  the  bank,  the  directors 
and  their  nominees  were  severally  debited  with  the  amount  in  a  private  ledger,  locked 
up,  and  the  key  deposited  with  the  chief  accountant.  In  addition  to  this,  each  director 
had  a  current  account  with  the  bank,  and  many  of  them  had  overdrawn  their  accounts 
to  a  very  large  amount.  Nor  was  this  all,  for  it  further  appeared  that  many  of  them 
were  also  indebted  in  large  sums  of  money  on  notes  of  hand,  which  being  placed  u*  the 
account  of  securities,  did  not  appear  in  the  books  as  a  debit  against  the  directors. 
Upon  combining  these  several  items  of  debt,  it  was  ascertained  that  there  was  no  less 
than  £290,000  due  by  the  directors,  and  that  there  was  near  £14,000  due  by  the 
managers  and  clerks."  (Committee  on  Joint-Stock  Banks,  1837.) 

It  is  not  creditable  to  any  bank  to  receive  the  services  of  its  directors  as 
a  matter  of  charity ;  nor  is  it  wise.  A  director  who  is  paid  for  his  services 
may  justly  be  called  to  account  for  neglect  of  duty.  In  this  case,  too,  he 
cannot  expect  payment  in  any  other  way.  In  his  transactions  with  the 
bank  he  is  then  on  the  same  footing  as  any  other  customer.  It  has  been 
said,  that  the  directors  are  such  honorable  men  that  they  will  attend  to  their 
duty  as  strictly  if  badly  paid  as  if  liberally  paid.  If  so,  they  ought  to  be 
liberally  paid,  as  it  is  very  desirable  that  such  honorable  men  should  be 
most  closely  attached  to  the  bank.  But  we  doubt  the  fact.  In  matters  of 
almsgiving,  men  will  give  only  what  they  can  conveniently  spare.  If  a 
director  is  to  give  his  time  for  nothing,  he  will  give  only  that  portion  of 
his  time  which  he  cannot  more  profitably  or  more  agreeably  employ  else- 
where. In  matters  of  business,  men  will  apportion  their  services  accord- 
ing to  the  return  they  receive  for  them.  There  is  no  way  of  securing 
constant  punctuality  of  attendance  on  the  part  of  directors,  but  by  paying 
them  liberally  for  that  attendance.  In  some  cases  where  payment  has  not 
been  given,  or  given  only  to  the  managing  directors,  it  is  said  that  the 
K*  125 


A  Treatise  on  Banking. 

gorernment  of  the  bonk  has  faU'-n  into  the  hands  of  a  few  persons  whoso 
punctuality  of  attendance  has  been  almost  their  only  banking  virtue.  But 
tin-  main  advantage  of  liberal  payment  is  its  effect  upon  the  minds  of  tin- 
directors.  Every  honorable  man  will  attend  to  his  duty  with  alacrity  and 
energy,  and  will  even  make  extra  exertions  for  the  benefit  of  the  bank, 
when  ho  finds  that  his  services  are  handsomely  and  liberally  appro- 


We  need  hardly  say,  that  the  faults  we  have  pointed  out  in  the  admin- 
istration or  constitution  of  joint-stock  banks  are  by  no  means  inherent  in 
the  system.  They  are  accidental  circumstances,  arising  from  its  estab- 
lishment in  a  new  country,  by  parties  who  had  no  previous  opportunity  of 
understanding  its  principles.  The  system  is  no  longer  new,  its  princi- 
ple* are  now  well  understood,  and  it  may  reasonably  be  expected  that  the 
calamities  of  the  past  will  never  recur. 


SECTION  XL— THE  ADMINISTRATION  OF  THE  OFFICE. 
In  this  section  we  shall  consider  the  following  topics :  — 

I.  The  Arrangement  of  the  Office. 
II.  The  Selection  and  Appointment  of  the  Clerks. 

III.  The  proper  Distribution  of  their  Duties. 

IV.  The  Amount  of  their  Salaries. 
V.  The  System  of  Promotion. 

VI.  The  Rules  of  Discipline. 
VII.  The  Training  of  Clerks  for  higher  Offices. 

I.  The  Arrangement  of  the  Office. 

The  proper  situation  of  a  bank  is  a  matter  of  some  importance.  It 
should  be  situated  in  what  is  deemed  the  most  respectable  part  of  the 
town.  If  it  be  placed  in  an  inferior  locality,  approachable  only  by  nar- 
row and  disagreeable  streets,  and  surrounded  by  buildings  the  seats  of 
smoky  and  dirty  trades,  it  is  not  likely  to  be  so  much  frequented,  nor  to 
acquire  so  large  a  business,  as  though  it  were  more  pleasantly  situated. 
Another  point  to  be  observed  is,  that  the  bank  itself  should  be  a  handsome 
building.  The  necessary  expenditure  for  this  purpose  is  no  sin  against 
economy.  It  is  an  outlay  of  capital  to  be  repaid  by  the  profits  of  the 
business  that  will  thus  be  acquired.  A  portion  of  the  building  will  pro- 
bably be  set  apart  for  the  private  residence  of  the  manager,  or  of  some 
other  officer  of  the  establishment  It  is  desirable  that  this  portion  should 
be  entirely  separated  from  the  office.  The  communication  should  be  only 
by  a  single  door,  of  which  the  manager  should  keep  the  key.  The  build* 
ing  should  be  so  constructed  that  what  is  going  on  in  the  private  house, 
whether  in  the  kitchen,  or  the  nursery,  or  the  drawing-room,  should  not 
be  beard  in  the  bank.  The  office  being  thus  isolated,  must  then  be  fitted 

126 


Arrangement  of  the  Office. 

up  in  the  way  that  will  most  effectually  promote  the  end  in  view.  And 
here  are  three  points  to  be  considered,  —  space,  light,  and  ventilation. 

A  chief  consideration  is  space.  A  banker  should  take  care  that  his 
clerks  have  room  enough  to  do  their  work  comfortably.  Every  account- 
ant knows  that  he  can  often  work  faster  if  he  can  have  two  or  more  books 
open  at  the  same  time  ;  but  if  his  space  is  so  confined  that  he  must  shut 
up  one  book  and  put  it  away,  before  he  can  use  another,  he  will  get  on 
more  slowly.  The  cashiers,  too,  will  be  much  impeded  if  they  are 
obliged  to  stand  too  close  to  each  other ;  and  the  public  will  be  huddled 
together,  and  will  often  count  incorrectly  the  money  given  to  them,  and 
thus  take  up  the  cashiers'  time  to  put  them  right.  Want  of  space  will  ne- 
cessarily occasion  errors,  from  the  confusion  it  produces,  and  from  one 
clerk  being  liable  to  interruption  from  the  noise  or  vicinity  of  the  others. 
A  banker  should  therefore  take  care  that  his  office  is  large  enough  for  his 
business ;  and  that  it  will  admit  of  being  enlarged  in  case  his  business 
should  increase.  Ample  space  is  also  conducive  to  the  health  of  the 
clerks,  as  there  will  be  more  air  to  breathe,  and  the  atmosphere  is  less 
likely  to  become  polluted  by  the  burning  of  lamps  and  candles. 

Another  consideration  is  light.  It  is  well  known  in  every  London 
bank  that  fewer  mistakes  are  made  by  the  clerks  in  summer  than  in 
winter.  Abundance  of  light  prevents  mistakes,  and  saves  all  the  time 
that  would  be  employed  in  the  discovery  of  errors.  Light  is  also  of  great 
importance  to  the  cashiers  in  detecting  forged  signatures,  and  bad  or 
counterfeit  money.  Thieves  are  also  less  likely  to  attempt  their  robbe- 
ries in  a  light  office  than  in  a  dark  one.  Faint  or  illegible  hand-writing 
can  be  more  easily  read,  and  hence  mistakes  are  less  likely  to  occur. 
The  clerks,  too,  perform  their  duties  with  more  quickness  and  cheerful- 
ness. The  gloominess  of  an  office  throws  a  gloom  over  the  mind ;  but 
"  light  is  sweet,  and  a  pleasant  thing  it  is  for  the  eyes  to  behold  the  sun." 

The  lightest  part  of  the  office  should  be  devoted  to  the  clerks.  We 
have  observed  sometimes  a  violation  of  this  principle.  The  entrance 
door  has  been  placed  in  the  middle  of  the  front,  with  a  window  on  each 
side,  and  the  counter  thrown  across  the  room,  so  that  the  lightest  part  of 
the  office  has  been  given  to  the  public.  It  is  better  that  the  entrance  be 
placed  at  the  right  or  the  left  corner,  and  the  counter  be  made  U>  run  from 
the  window  to  the  opposite  wall.  The  light  will  thus  fall  lengthways  on 
the  counter,  and  the  space  behind  the  counter  will  be  occupied  by 
the  clerks. 

Ventilation.  —  Volumes  have  been  written  by  medical  men  upon  the 
advantages  of  fresh  air,  and  on  the  unwholesome  atmosphere  of  crowded 
cities.  If  the  air  that  circulates  in  the  streets  of  towns  and  cities  is  impure, 
what  must  be  the  state  of  those  offices  or  rooms  where  twenty  or  thirty  per- 
sons are  breathing  close  together  during  the  whole  of  the  day,  and  gas- 
lights are  burning  during  the  evening !  In  such  cases  we  are  told  that  a 
person  afflicted  with  consumption  of  the  lungs  may  communicate  the  com- 
plaint to  others,  as  they  must  inhale  a  portion  of  the  atmosphere  which  he 
has  breathed  out.  The  air  in  a  close  office  is  not  only  rendered  impure 
by  the  number  of  people  that  breathe  it,  and  by  the  burning  of  gas,  but  it 
also  contains  very  frequently  particles  of  dust  arising  from  the  floor, 

127 


A  Treatiie  on  Banking. 

thiaugh  the  number  of  people  constantly  walking  in  and  out.  It  is  almost 
impossible  for  portions  so  circumstanced  to  enjoy  for  a  length  of  time  even 
moderate  health.  A  portion  of  this  evil  may  be  mitigated  by  a  good  system 
of  ventilation.  To  obtain  this  should  be  regarded  as  an  object  of  the  first 
importance.  If  a  banker  does  not  insist  upon  the  architect  p.  rf..rming 
this  in  the  most  effectual  manner,  be  must  bo  content  to  be  often  put  to 
inconvenience  through  the  illness  and  consequent  absence  of  his  clerks. 

Having  made  due  provision  for  space,  light,  and  ventilation,  it  \\  ill  now 
become  necessary  to  arrange  the  counter,  desks,  and  other  furniture,  so  as 
to  enable  any  given  number  of  clerks  to  discharge  their  duties  with  the 
greatest  efficiency,  and  so  as  best  to  promote  the  public  conveni<  nee.  It 
ianot  necessary,  or  possible,  to  give  very  minute  instructions  on  this  head, 
as  much  will  depend  upon  the  form  of  the  building,  the  extent  of  the  busi- 
ness, and  other  circumstances.  We  will  notice  only  a  few  general  objects 
to  be  kept  in  view. 

It  is  desirable  at  all  times  to  make  those  arrangements  that  shall  best 
promote  the  convenience  of  the  public. 

The  counter  should  be  readily  accessible,  and  of  sufficient  length  to 
meet  the  requirements  of  the  business ;  and  the  cashiers'  desks  sufficient- 
ly wide  apart  for  the  public  to  be  promptly  served,  and  to  stand  without 
jostling  one  another.  Some  banks  have  two  counters,  one  for  paying, 
and  the  other  for  receiving.  At  other  banks  the  cashier  does  not  enter 
the  credits,  but  merely  agrees  the  amount  with  the  customer,  and  then 
pusses  them  to  a  clerk,  who  enters  them  in  the  Waste  Book.  In  tlie  same 
way,  when  a  cheque  is  presented  for  payment,  he  gives  it  to  a  clerk  be- 
hind him,  who  enters  it,  and  hands  the  notes  to  the  cashier,  who  pays  out 
the  gold  and  silver.  When  the  business  is  large,  extra  or  supernumerary 
cashiers  are  appointed,  who  take  the  place  of  the  regular  cashiers  when 
they  are  absent  at  dinner  or  otherwise,  so  that  during  the  whole  of  the  day 
all  the  cashiers1  desks  are  occupied.  To  relieve  the  counter,  the  payment 
of  bills  that  have  been  presented  in  the  morning  and  not  paid,  is  usually 
received  at  a  separate  desk  or  office.  All  these  are  expedients  that  should 
be  adopted  when  necessary,  to  save  the  time  of  the  public.  There  are 
few  things  that  try  a  man's  temper  more  than  to  be  kept  waiting  a  long 
time  at  a  Banker's  counter;  and  he  will  be  very  apt  to  give  vent  to  his 
impatience  by  quarrelling  with  the  clerks,  or  reproaching  the  establish- 
ment 

Another  object  is,  to  place  near  together  those  clerks  whose  duti<  -  \\  ii! 
require  them  to  have  frequent  communication  with  each  other.  If  this 
rule  be  not  observed,  the  clerks  will  lose  much  time  in  the  course  of  the 
day  in  passing  from  one  part  of  the.  office  to  the  other ;  and  the  work  will 
not  be  so  expeditiously  performed.  It  is  especially  desirable  that  the 
ledger  keepers  should  be  placed  close  behind  the  cashiers ;  so  that  if  a 
doubtful  cheque  be  presented  for  payment,  the  cashier  may  be  able  to 
•bow  it  to  the  ledger  keeper,  and  be  informed  if  he  may  pay  it,  without 
being  observed  by  the  party  presenting  it. 

Another  point  is,  to  place  the  desk  of  the  chief  or  head  clerk  in  such  a 
position  that  he  can  see  all  over  the  office.  "  A  master's  eye  will  dc 
more  work  than  both  his  hands.'1  In  this  case,  if  the  counter  is  crowded, 

128 


Selection  of  Clerks. 

the  chief  clerk  will  perceive  it,  and  appoint  additional  clerks  to  assist  the 
cashiers.  If  disputes  take  place  between  the  clerks,  or  between  the 
cashiers  and  the  public,  he  will  come  forward  and  settle  the  matter  before 
the  dispute  is  carried  to  high  words.  He  will  observe,  too,  the  customers 
who  come  frequently  to  the  counter,  and  from  their  transactions  he  will 
often  draw  conclusions  respecting  their  circumstances  which  will  be  ser- 
viceable to  the  bank.  It  is  generally  best  that  many  of  the  clerks  should 
be  so  placed  as  to  look  towards  the  counter.  It  has  been  said  that  this 
draws  off  their  attention  from  their  work  ;  but  we  do  not  think  this  is  gen- 
erally the  case,  although  it  may  occasionally  relieve  the  irksomeness  of 
their  duties.  A  dishonest  person  standing  at  the  counter,  and  watching 
an  opportunity  of  committing  a  robbery  when  the  cashier  is  engaged,  will 
be  more  likely  to  abstain  from  making  the  attempt  when  the  eyes  of  other 
clerks  have  a  command  of  the  counter.  This  arrangement  will  depend 
in  some  measure  on  the  direction  of  the  light.  The  clerks  should  not 
have  their  faces  or  their  backs  towards  the  window,  but  the  light  should 
fall  on  them  sideways.  These  matters  may  appear  trifling,  but  they 
will  not  be  deemed  unimportant  to  those  who  are  intrusted  with  the 
practical  administration  of  an  office.  It  is  only  by  attention  to  minute 
things  that  the  business  of  an  office  can  be  well  conducted. 

II.  The  Selection  and  Appointment  of  Clerks. 

When  a  bank  is  first  formed,  they  sometimes  advertise  for  clerks ;  but 
this  is  usually  for  clerks  of  a  higher  rank,  who  have  had  some  experience 
in  the  business  of  banking.  When  a  bank  is  established,  it  has  seldom 
occasion  for  new  clerks  of  this  class.  A  vacancy  in  one  of  the  higher  de- 
partments is  filled  up  by  the  next  clerk  in  rank,  and  so  on  in  order,  and 
the  new  clerk  comes  in  as  a  junior.  Applications  for  this  post  are  usually 
so  numerous  that  the  only  difficulty  is  in  making  the  selection.  Those 
recommended  by  parties  known  to  the  bank,  as  customers  or  sharehold- 
ers, usually  have  the  first  claim.  In  some  banks  the  nomination  of  the 
junior  clerks  is  regarded  as  a  portion  of  the  patronage  of  the  directors, 
upon  the  understanding,  however,  that  they  nominate  none  but  such  as  are 
properly  qualified,  and  who  shall  prove  their  fitness  to  the  satisfaction  of  a 
committee  of  directors. 

In  making  inquiries  into  the  qualifications  of  applicants,  it  is  necessary 
to  ascertain,  in  the  first  place,  their  age.  In  London,  the  age  at  which 
clerks  are  admitted  into  a  bank  is  usually  about  nineteen.  As  their  first 
duty  is  to  collect  payment  of  bills,  it  is  necessary  they  should  have  ar- 
rived at  a  sufficient  degree  of  strength  to  be  able  to  make  some  resistance 
were  an  attempt  to  be  made  to  rob  them  of  their  bill-case  ;  and  also  that 
they  should  have  arrived  at  an  age  to  be  conscious  of  the  responsibility 
of  their*  office.  In  the  country  parts  of  England,  and  in  Scotland,  clerks 
are  taken  at  an  earlier  age ;  but  the  duties  are  different  from  those  dis- 
charged by  the  same  class  in  London. 

Another  consideration  is  the  class  of  society  from  which  clerks  are 
taken.  Candidates  for  the  office  of  bank  clerks  are  usually  the  sons  of 
the  middle  class  of  tradesmen,  or  of  professional  men,  as  clergymen, 
officers  in  the  army  or  navy,  or  persons  in  the  service  of  Government. 

129 


A   Treatise  on  Banking. 

During  the  last  war,  bankers1  clerks  were  generally  tne  sons  of  trades- 
men, as  the  sons  of  gentlemen  could  usually  find  employment  under  Gov- 
ernment But  now  that  places  under  tin-  t;,,\,  rmneiit  nre  not  so  easily 

oht;i;n.    :.    in.  IU'-TS   of    what    an-    railed    respectable    families    are    found 

among  the  candidates  for  admission  into  the  service  of  banks.  Each  class 
has  some  advantages.  The  sons  of  gentlemen  have  generally  a  l«-ti<  r 
literary  education,  and  have  usually  a  more  courteous  address.  On  the 
other  hand,  they  have  no  notion  of  business,  and  no  business  habits. 
They  have  been  accustomed  to  go  a-hunting  and  a-fisbing  with  the  sons 
of  men  of  large  property,  and  they  look  upon  banking  business  as  a 
drudgery  to  which  they  submit  from  necessity,  but  which  is  much  !><•- 
neath  the  destiny  to  which  they  think  they  are  entitled.  On  the  other 
hand,  the  sons  of  tradesmen  have  been  accustomed  to  notions  of  business 
from  the  ordinary  conversation  of  their  fathers'  fireside ;  they  know  they 
must  get  their  own  living;  they  look  upon  their  admission  into  a  bank  as 
a  lucky  event,  and,  consequently,  apply  themselves  to  their  duties  with 
heartiness  and  cordiality. 

Another  inquiry  of  those  who  are  candidates  for  admission  into  a  bank 
is,  how  they  have  been  employed.  Lads  just  come  from  school,  of  course 
know  nothing  of  the  business  of  a  bank,  and,  if  taken  at  all,  they  should 
be  taken  upon  trial  for  three  or  six  months,  so  that  their  qualifications 
may  be  discovered  before  they  are  permanently  appointed.  Those  who 
have  been  two  or  three  years  in  a  merchant's  counting-house  are  gener- 
ally found  to  be  the  most  efficient.  But  to  have  been  in  the  office  of  a 
Mock-broker  or  a  solicitor,  or  to  have  studied  for  one  of  the  learned  pro- 
fessions,  is  no  recommendation.  Clerks  from  country  banks,  and  espe- 
cially those  from  the  banks  of  Scotland,  when  introduced  into  London 
banks,  are  at  first  usually  considered  to  be  slow. 

It  is  also  proper  to  inquire  into  the  parentage  of  the  candidate.  For 
although  honesty  and  dishonesty  do  not  run  in  the  blood,  yet  it  is  probable 
that  religious  and  virtuous  parents  have  given  their  children  a  religious 
and  virtuous  education ;  and  a  youth  who  has  been  accustomed  to  see  ex- 
amples of  excellence  at  home,  will  be  the  most  likely  to  exhibit  those  ex- 
cellencies in  his  own  conduct.  A  high  degree  of  moral  principle  is  in  it- 
self a  necessary  qualification  in  a  post  of  trust  and  responsibility,  and  it  is 
usually  associated  with  a  cultivated  and  improved  state  of  the  intellectual 
faculties.  "  If  there  be  in  the  character  not  only  sense  and  soundness, 
but  virtue  of  a  high  order,  then,  however  little  appearance  there  may  be  of 
talent,  a  certain  portion  of  wisdom  may  be  relied  upon  almost  implicitly. 
For  the  correspondencies  of  wisdom  and  goodness  are  manifold,  and  that 
they  will  accompany  each  other  may  be  inferred,  not  only  because  men's 
wisdom  makes  them  good,  but  also  because  their  goodness  mokes  them 
wise.  Although,  therefore,  simple  goodness  does  not  imply  every  sort  of 
wisdom,  it  unerringly  implies  some  essential  conditions  of  wisdom ;  it 
implies  a  negative  on  folly,  and  an  exercised  judgment,  within  such  limits 
as  nature  shall  have  prescribed  to  the  capacity."  (Taylor's  States- 
man.) 

Testimonials  are  to  be  received  with  caution.  Young  men  who  come 
to  London  in  search  of  a  place,  often  bring  with  them  a  host  of  testimo- 

130 


Duties  of  Clerks. 

nials,  which  they  expect  will  place  them  at  the  head  of  any  list  of  candi- 
dates. When  upon  other  grounds  there  is  an  intention  of  engaging  the 
applicant,  these  letters  of  recommendation  may  sometimes  be  read.  It 
may  be  useful  to  observe  by  whom  the  testimonials  are  given,  and 
whether  those  persons  have  had  opportunities  of  judging  of  the  adaptation 
of  the  party  for  the  office  he  seeks.  It  may  also  be  noticed  what  qualities 
are,  and  more  particularly  what  qualities  are  not,  ascribed  to  the  appli- 
cant. It  has  been  said,  that  when  a  lady  is  praised  for  being  "  amiable 
and  accomplished,"  it  may  be  inferred  that  she  is  neither  young  nor  hand- 
some. So  if  a  testimonial  speaks  highly  of  a  young  man's  "  industry  and 
integrity,"  it  may  generally  be  inferred  that  he  does  not  possess  much  tal- 
ent. It  is  true  that  these  qualities  are  of  more  importance  than  talent. 
But  while  they  are  more  important,  they  are  also  more  common ;  and  if  a 
young  man  possesses  any  kind  of  intellectual  superiority,  the  fact  will 
certainly  not  be  omitted  in  his  testimonial. 

HI.  The  distribution  of  the  duties  of  the  various  clerks  is  a  matter  of  no 
small  importance.  Experience  is  the  only  efficient  guide  in  making  such 
arrangements.  We  may,  nevertheless,  lay  down  a  few  general  princi- 
ples. The  great  division  of  the  business  of  a  bank  office  is  into  the 
cashier's  department  and  the  accountant's  department.  In  London  banks 
there  is  a  third,  —  the  tellers,  or  out-door  department.  In  the  distribution 
of  duties,  it  is  desirable  that  the  accountant's  department  should  be  a 
check  upon  the  other  departments.  The  cashiers  must  not  have  the  con- 
trol of  the  books,  nor  the  accountants  the  care  of  the  cash.  The  account-  * 
ants'  books  should  show  what  amount  of  cash  is  in  the  hands  of  the  cash-  j 
iers ;  and  it  is  the  business  of  the  cashiers  to  show  that  they  have  that  - 
amount  of  cash  which  corresponds  with  the  accountant's  books.  If  the 
same  officer  has  the  care  of  the  cash  and  the  command  of  the  books,  he 
may  abstract  a  portion  of  the  cash,  and  alter  the  books  to  make  them  cor- 
respond. It  is  further  desirable,  in  large  establishments,  that  two  books 
which  act  as  a  check  upon  one  another,  should  not  be  kept  by  the  same 
clerk.  While  it  is  not  proper  to  indulge  a  spirit  of  suspicion  in  regard  to 
individuals,  it  is  advisable  that  the  duties  of  a  bank  office  should  be  so  dis- 
tributed that  the  intromissions  of  any  one  clerk,  either  by  the  abstraction 
of  cash  or  the  falsification  of  the  books,  should  be  liable  to  immediate  de- 
tection by  the  entries  in  some  book  kept  by  another  clerk.  For  the  same 
reason,  it  is  proper  that  any  document  issued  to  the  public  (such  as  de- 
posit receipts,  drafts  on  London,  &c.)  should  be  signed  by  two  officers,  of 
whom  one  should  belong  to  the  cash,  and  the  other  to  the  accountants' 
department.  There  ought  to  be  a  complete  division  of  labor  in  a  bank. 
Every  clerk  should  have  fixed  duties  to  perform,  and  every  duty,  however 
unimportant,  should  be  assigned  to  some  particular  clerk.  If  any  thing  is 
neglected,  there  should  be  no  doubt  as  to  who  is  to  blame.  No  one  should 
be  able  to  say,  "  It  was  not  my  business ;  it  was  yours."  Nor  ought  any 
duties  to  be  assigned  in  common  to  two  or  three  clerks,  to  be  performed 
by  them  as  each  may  find  time.  In  this  case,  each  will  do  as  little  as  he 
can,  and  nothing  will  be  done  well.  If  any  dispute  arises  among  the 
clerks  as  to  the  due  division  of  their  labors,  a  reference  should  be  made 

131 


A  Trtatue  on  Banking. 

to  the  chief  clerk,  who  will  give  to  each  man  his  work,  and  hold  him  re- 
sponsible for  its  proper  performance. 

IV.  The  Amount  of  their  Salaries. 

rding  to  Adam  Smith,  the  wages  of  Inbor  are  regulated  by  the  fol- 
lowing circumstance* :  —  1.  The  agrceableness  or  disagreeableness  of  the 
employments  themselves.  2.  The  easiness  and  cheapness,  or  the-  diffi- 
culty and  expsjflsje  of  learning  them.  3.  The  constancy  or  m< •niix'.-un -y 
of  employment  in  thorn.  4.  The  small  or  great  trust  \\liicli  must  he  re- 
posed  in  those  who  exercise  them.  5.  The  probability  or  improbability 
of  success  in  them. 

Mr.  Mill  makes  the  following  observations  with  regard  to  the  salaries 
of  clerks :  — 

u  A  clerk  from  whom  nothing  is  required  but  the  mechanical  labor  of  copying,  gains 
more  than  an  equivalent  for  hia  mere  exertion  if  he  receives  the  wages  of  a  bricklay- 
er's laborer.  His  work  is  not  a  tenth  part  as  hard,  it  is  quite  as  easy  to  learn,  and  his 
condition  is  Ins  precarious,  a  clerk's  place  being  generally  a  place  for  life.  Tl»  liiu'li'-r 
rate  of  his  remuneration,  therefore,  most  be  partly  ascribed  to  monopoly,  the  small  de- 
gree of  education  required  being  not  even  yet  so  generally  diffused  as  to  call  forth  the 
satnral  number  of  competitors,  and  partly  to  the  remaining  influences  of  an  an<i<  nt 
osstoiu,  which  requires  that  clerks  should  maintain  the  dress  and  appearance  of  a  more 
hitrhly  ,,-n.l  sW 

"  It  is  usual  to  pay  greatly  beyond  the  market  price  of  their  labor  all  persons  in 
whom  the  employer  wishes  to  place  peculiar  trust,  or  from  whom  he  requires  some- 
thing besides  their  mere  services.  For  example,  most  persons  who  can  afford  it,  nay  to 
their  domestic  servants  higher  wages  than  would  purchase  in  the  market  the  labor  of 
persons  fully  as  competent  to  the  work  required.  They  do  this,  not  from  mm-  osten- 
tation, but  from  reasonable  motives ;  because  they  desire  thut  those  they  employ  should 
serve  them  cheerfully,  and  be  anxious  to  remain  in  tlic-ir  -  .m-r  tin  \  ii<>  not 

like  to  drire  a  hard  bargain  with  people  whom  they  are  in  constant  int. T< -oiir-t-  with  ; 
and  because  they  dislike  to  have  near  their  persons,  and  continually  in  their  sight, 
people  with  the  appearance  and  habits  which  are  the  usual  accompaniments  of  a  mean 
remuneration.  Similar  feelings  operate  in  the  minds  of  men  in  IHI.MIU-.SS  with  respect 
to  their  clerks."  (Principle  of  Political  Ecotamy,  by  John  Stuart  Mill,  Vol.  I 
pp.  461-475.) 

There  would  be  considerable  difficulty  in  applying  the  rules  laid  down 
by  political  economists  with  regard  to  the  wages  of  labor  to  the  case  of 
bank  clerks.  A  banker  does  not  hire  a  clerk  because  he  is  the  cheapest 
man  he  can  get,  nor  does  he  dismiss  him  as  soon  as  he  can  get  another 
man  to  do  the  same  work  at  a  lower  price.  He  would  not  find  it  his  in- 
terest to  do  this;  for  his  work  is  of  a  peculiar  kind.  II  is  clerks  must  have 
a  certain  degree  of  education  and  of  manner,  and  be  taken  from  a  certain 
class  in  society.  They  are  not  allowed  to  engage  in  any  other  employ- 
ment ;  they  have  to  maintain  a  respectable  appearance ;  they  must  be 
qualified,  not  merely  for  the  lowest  post  in  the  Link,  but  must  be  pre- 
pared to  take  higher  posts  should  vacancies  occur.  And  in  every  post 
they  are  intrusted  with  a  large  amount  of  properly,  and  upon  their  integ- 
rity and  prudence  much  reliance  must  at  all  times  be  placed.  All  these 
circumstances  serve  to  show,  that,  in  fixing  the  amount  of  their  salanc •«, 
the  banker  should  be  anxious  to  err  (if  he  err  at  all)  on  the  side  of 
liber  i 

He  ought  also  to  take  into  consideration  the  effect  which  the  amount  of 

132 


Salaries. 

salary  produces  on  the  mind  and  condition  of  the  party  receiving  it.  If 
an  advance  of  salary  quickens  the  attention  or  the  zeal,  or  strengthens  the 
fidelity  of  a  party,  or  induces  him  to  cultivate  those  talents  which  add  to 
his  efficiency,  or  if  it  enables  him  to  move  in  a  higher  class  of  society, 
and  gives  him  a  station  and  an  influence  which  enable  him  to  be  useful  to 
the  bank,  then  is  such  advance  of  salary,  though  entered  in  the  books 
under  the  item  of  expenditure,  an  outlay  of  capital  which  is  repaid  to  the 
banker  with  interest  in  the  effect  it  produces,  —  an  outlay  that  becomes 
probably  one  of  the  most  profitable  of  his  investments.  We  have  great 
pleasure  in  transcribing  the  following  letter  from  Mr.  Samuel  Jones  Loyd. 
It  was  addressed  to  the  chief  clerk  of  his  London  bank.  We  abstain  from 
all  eulogium,  as  the  letter  will  speak  for  itself:  — 

"DEAR  MR.  KIRBT,  —  The  inclosed  draft  for  £1,000  I  request  you  will  place  to 
the  credit  of  the  '  Clerks'  Christmas  Fund.'  At  the  close  of  the  first  year  since  my 
accession  to  the  head  of  this  concern,  I  am  desirous  of  offering  to  those  through  whose 
assistance  I  have  been  enabled  to  bring  it  to  a  satisfactory  conclusion,  some  substantial 
proof  of  my  sense  of  their  services,  and  of  the  interest  which  I  feel  in  all  that  concerns 
their  comfort  and  happiness.  The  year  now  closing  has  been  marked  by  some 
circumstances  of  an  accidental  and  temporary  character,  which  have  tended  to  throw 
an  unusual  degree  of  labor  and  trouble  on  the  clerical  department  of  the  office.  Of 
the  readiness  with  which  this  difficulty  has  been  met  and  overcome  I  am  very  sensible ; 
and  for  this,  as  well  as  for  the  uniform  zeal  and  integrity  with  which  the  general  duties 
of  the  office  are  discharged,  I  beg  that  the  clerks  will  accept  my  grateful  acknowledg- 
ment, and  that  you  and  they  will  believe  me  to  be  the  faithful  friend  of  you  all. 

"  S.  J.  LOYD. 

u  Lotlbury,  December  Mfh,  1845." 

In  all  banks  the  junior  clerks  have  lower  salaries  than  the  senior  clerks. 
In  Scotland,  a  clerk  usually  serves  an  apprenticeship  of  three  years,  dur- 
ing which  he  receives  but  a  small  salary.  This  plan  has  been  introduced 
into  some  of  our  country  banks.  In  London  it  does  not  exist.  In  the 
private  banks,  a  junior  clerk  usually  commences  with  £  GO  a  year,  and  a 
portion  of  the  Christmas  money.  In  the  joint-stock  banks,  where  no 
Christmas  money  is  allowed,  the  commencing  salary  is  usually  £  80.  But 
the  rules  of  advance  are  various,  and,  indeed,  must  be  so,  depending  as 
they  do  upon  the  prosperity  of  the  banks,  and  other  contingent  circum- 
stances. One  bank  may  assign  a  certain  fixed  annual  increase  to  each 
clerk,  whether  he  advance  in  rank  or  not.  In  this  case,  his  salary  will  be 
regulated  entirely  by  the  number  of  his  years  of  service.  Another  bank 
may  have  a  fixed  salary  for  each  post,  and  a  clerk  has  no  increase  of  sal- 
ary except  when  he  takes  a  step  in  rank.  Another  bank  may  adopt  a 
scale  of  salaries  combining  the  principles  of  the  other  two.  For  instance, 
every  post  in  the  bank  may  have  a  fixed  minimum  salary.  But  each 
clerk  holding  a  post  for  a  certain  period  (say  for  five  years),  has  an 
annual  advance  for  that  period.  Then  he  stops,  and  receives  no  further 
advance  until  he  is  promoted  to  the  next  post,  where  again  he  becomes 
entitled  to  the  annual  advances  belonging  to  that  post.  We  give  no  opin- 
ion as  to  the  respective  merit  of  these  plans.  But  there  is  one  principle 
we  would  enforce,  that  the  salaries  of  the  clerks  should  be  regulated  by 
the  prosperity  of  the  bank.  If  the  bank  is  prosperous,  the  clerks  ought  to 
share  in  its  prosperity ;  and  if  the  bank  is  unfortunate,  the  clerks  must 
consent  to  share  in  its  ill  fortune.  But,  under  any4  cirumstances,  a  scale 
L  133 


t*  Banking, 

of  aalariee  •  dosjiieUi  It  prevents  caprice  on  the  part  of  the  bank,  and 
jseloiHT  on  the  part  of  the  clrrks.  The  amount  of  salary  in  each  case 
snoaU  be  feed  by  rule,  and  not  by  favor. 

With  refennoe  to  thk  subject  we  quote  from  Mr.  Taylor's  work,  en- 
titled M  The  ffamemnn.**  a  work  which  he  states  to  have  been  the  result 
of  twelve  yean*  official  experience :  — 

'  It  b  oftaa  MM.  that  to  orssr  to  got  dBdent  serriee  good  pay  mnrt  be  offered     Hut 
*  tt  apaobrtSMnt*  of  young  men.    On  the  contrary,  it  will 

i  of  the  temptation,  by  bringing  into  a/ -tivity  the  most 

__.j  which  abate*  or  patronage  are  engendered,  will'  lead  to  the 
:  </•  wor*  man  than  would  have  been  obtained  by  a  smaller  oflVr.     On 

ad.  thong*  awa  of  proaabe  are  to  be  had  cheap,  wh'ilst  they  are  young  and 

ttMir  vahtt  b  link  known  to  tfcenwelvet  or  other*,  they  cannot,  when  'this  is'  no  longer 
•War  oaaagfena,  ht  kept  Car  a  small  consideration,  or  at  least  kept  contented.  But  a 
i«MonaM>  dagrw  of  contentment  b  of  eatential  importance  where  the  understanding 
b  the  ajiMinna  There  b  DO  pontion  to  ttrong  a*  that  of  a  man  who  stands  upon  his 
hand ;  awl  if  he  M  not  indoced  to  the  activity  or  just  thinking  and  clear  reasoning,  he 
'  f  ha  aoaroai  to  h.  Upon  the  whole,  therefore,  I  would  say,  that  what  is 
•aha  to  good  appointments  in  the  first  instance,  and  thenceforward  to  drriv- 
t  ffoaa  thorn,  b  to  offer  small  remuneration  to  the  beginner,  with  successive 
•  proportioaed  to  the  merit*  which  he  shall  manifest,  and  of  such  increas- 
;  M  •hall  be  calculated  to  keep  easy,  through  the  progressive  wants  of  single 
1  Ma,  the  mind  of  a  prudent  man.  Upon  snch  a  system,  if  unfit  men  he- 
ttaoatial  ftrnflfrr  thall  make  good  an  entrance  into  the  service,  they  will 
ha  BMC*  sasBjr  got  rid  of ;  rince,  finding  that  they  have  got  but  little  in  hand,  and'  have 
bat  Uttto  more  to  took  to,  they  will  hardly  be  des'iron*  to  continue  in  a  career  in  which 
•My  ana*  expect  to  tee  their  competitor*  shoot  ahead  of  them." 

The  following  is  an  account  of  the  total  amount  of  salaries,  morning 
money,  gratuities,  dec.,  paid  to  the  servants  of  the  Bank  of  England  in 
London  and  at  the  branches,  and  of  the  number  of  persons  to  whom  the 
•aid  amount  was  paid,  for  the  year  ending  the  29th  of  February, 

9*0  Clerk*  and  porter*, ) 

SS  PrinMra  and  engraven,         .        .        .       \  £211,903  10*.  \0d. 
M  Clerk*  and  porters  at  the  branches,  .        .   ) 

•40,  Average  £S33  each. 
of  nonaioM  paid  in  the  tame  period,  193  pensioners,  average  £161  each, 

—  In  all  banks  the  clerks  give  sureties  for  their  integrity,  — 
two,  of  £500  each ;  and  in  some  banks  these  amounts  are  in- 
oo  accession  to  higher  offices.  Of  late  years,  societies  have  been 
formed,  both  in  England  and  Scotland,  for  the  purpose  of  giving,  on  the 
part  of  clerks  and  others,  the  amount  of  security  required.  These  socie- 
tinaJlefethat,— 


--y-fy^y.^^'jy*  ^*  *****4ed  with  various  inconvenience*  and  ob- 

>**aff ,fy?  **" ****f'  *ccan»d  in  which  persons  of  the  highest  respecta- 

B  forego  valuable  appointments,  from  either  the  prent  difti- 

M*iai*JBW,or  a  repugnance  to  place  their  relatives  or  friends  and 

•JJP*™*  levolvad  therein.     The  society  undertakes,  on  the 

****^  ^y8"*'-?.  *.****  ?"l'*0JIMlk*  *°°<*  i»  case  of  default  by  fraud  or  dishon- 

«•»/  aay  IOMM  whxa  *aay  ha  asaniiad!  to  an  amount  specifically  agreed  upon,  and 

184 


Securities. 

by  such  means  obviates  the  necessity  for  private  sureties,  as  well  as  the  obligations 
arising  therefrom,  which  qften  prove  as  prejudicial  to  the  best  interests  of  employers 
as  to  the  party  seeking  guarantee. 

"  The  association  offers  to  the  public  the  following  advantages :  — 

"  To  the  employed.  —  It  obviates  the  difficulty  of  obtaining  the  requisite  securities 
for  personal  integrity,  which  has  often  placed  an  insuperable  barrier  in  the  way  of 
many  persons  of  the  highest  character  and  ability ;  it  affords  facilities  to  those  in  pur- 
suit of  employment,  and  relief  from  the  embarrassment  attendant  upon  asking,  with 
the  uncertainty  of  obtaining,  private  suretiship ;  and  removes  that  weight  of  obligation 
and  discomfort  which  such  engagements  necessarily  impose. 

"  To  the  employer.  —  The  ample  capital  of  the  association,  with  the  power  and  su- 
pervision lodged  in  the  Board  of  Trade,  renders  the  policy  of  the  company  much  more 
valuable  than  that  of  any  individual,  inasmuch  as  it  is  not  liable  either  to  doubt  or  de- 
preciation. In  large  establishments,  both  public  and  private,  where  the  securities  are 
numerous,  and  the  sureties  often  resident  in  many  different  parts  of  the  country,  and 
known  only  by  repute,  it  becomes  nearly  impossible  to  watch  over  their  continued  ex- 
istence and  solvency;  and  cases  of  default  have  frequently  occurred  when,  upon  inves- 
tigation, it  has  been  found  that  all  the  sureties  have  been  dead  for  many  years. 

"  The  rates  are  from  10s.  per  centum  per  annum,  and  upwards  (according  to  the  na- 
ture of  the  employment),  on  the  amount  of  security  required. 

"  No  charge  is  made  for  stamp  duty  except  in  special  cases ;  the  usual  legal  ex- 
penses of  surety  bonds  will  therefore  be  entirely  avoided  by  persons  who  enter  on  their 
respective  duties  under  the  guarantee  of  this  society. 

"  A  reduction  is  made  in  the  premium  on  the  sixth  annnal  payment" 

The  Lords  of  the  Treasury,  and  a  great  many  banking  companies,  have 
accepted  the  guarantee  of  these  societies. 

A  new  society  has  recently  been  formed,  entitled  "  The  United  Guar- 
antee and  Life  Insurance  Company,"  the  object  of  which  is  to  grant  po- 
licies for  fidelity  of  trust,  combined  with  policies  of  insurance  on  life,  or 
with  deferred  annuities  or  endowments.  The  following  are  extracts  from 
the  prospectus :  — 

"  Public  guarantee  and  life  insurance  are,  in  principle  and  practice,  so  closely  assim- 
ilated, that  they  may  be  fairly  recognized  as  the  relative  accompaniments  of  each 
other,  and  their  specific  advantages  are  here  mutually  presented  to  the  public  at  a  con- 
siderable reduction  of  premium. 

"  In  order  to  provide  against  the  numerous  cases  of  hardship  and  constant  uncer- 
tainty to  which  private  bondsmen  are  exposed,  the  directors  confidently  recommend 
the  combined  application  of  the  two  principles  to  all  classes  who  may  be  called  upon  to 
assume  the  risk,  or  who  may  stand  in  need  of  it  from  others. 

"  The  superiority  of  the  policies  of  a  public  company  has,  in  consequence  of  the  se- 
rious losses  which  have  arisen  from  decayed  or  depreciated  sureties,  induced  the 
heads  of  public  institutions  and  private  mercantile  firms  to  require  those  engaged  in 
their  service  to  provide  the  guarantee  of  a  public  company,  in  lieu  of,  and  in  pref- 
erence to,  that  of  private  individuals.  How  much  more  valuable  must  that  surety  be- 
come when  strengthened  and  additionally  secured  by  the  contingent  personal  interest 
(increasing  yearly  in  value)  of  insurance  on  life? 

"  The  life  policies  thus  issued,  payable  either  at  a  given  age,  say  50,  55,  60,  and  65, 
—  or  at  death,  should  that  event  take  place  before,  — or  for  the  whole  term  of  life, — 
and  the  deferred  annuities,  so  granted  in  conjunction  with  the  fidelity  policies,  will,  in 
the  event  of  breach  of  trust,  be  cancelled,  and  the  premiums  paid  thereon  forfeited. 
This,  however,  can  only  occur  by  a  voluntary  act  of  the  insured  themselves,  and  will 
not  in  any  other  respect  affect  the  value  of  the  life  policies  or  annuities. 

"  Particular  attention  is  requested  to  this  system  of  granting  deferred  annuities,  in 
conjunction  with  policies  for  the  fidelity  of  the  annuitants ;  by  which  it  will  be  seen 
that,  upon  paying  a  moderate  sum  annually  to  this  company,  any  youn^  man  of  ap- 
proved character  may  secure,  in  addition  to  a  policy  for  his  fidelity,  a  certain  provision  of 
£  50_per  annum  for  the  remainder  of  his  life,  commencing  at  the  age  of  50  or  upwards. 

"  To  the  provident  among  that  numerous  class  of  persons  who  either  hold  or  are 

135 


A  TVrrttM  on  Banking. 


._  _  __  r  «M»  company  offers  the  most  complete 

!•  Did  age,  which  May  tins  be  MCfred  by  the  insured  them- 


tt  b*  SftaaUWtly  apparent  that  the  MU 
so  frosted  taftBmly  preferable  to  those 
•e  cosBpasdas ;  a*d  that  they  bold  out  to 
dse  isMrad  SMciallT  interested  in  their 


Si  occupation*  of  trui 

•nt  that  the  rinks  thus  combined  will  render  the  surety 
thov  provided  by  private  sureties  and  other 
out  to  the  employers  increased  security,  by 
specially  iaterested  in  their  own  good  conduct;  and  to  t! 

share  of  confidence  from  their  employers,  and 
the  common  form  of  policy,  and  they  are  ro- 
_  ,  >ayinp  for  the  dishonesty  of  others. 

^,  ___  at  any 'time  wish  to  discontinue  the  surety  policy,  the  life  policy 

8M  be  affected  ihsiebj,  but  will  remain  in  force  upon  payment  thenceforth  of  an 
•SBsssl  pnaafem  to  be  specially  calculated. 

•  To  penos*  whose  Kvse  are  hssared  in  this  company,  and  who  may,  at  any  future 
time,  fuqsjsfs  policies  for  their  fidelity,  the  directors  will  be  prepared  to  grant  the  same, 
m  eoafbrmhy  with  the  regulations  of  the  company,  on  the  payment  of  a  moderate  ad- 
eUsssa  to  Iks  premica  chargeable  on  the  life  policies  alone/' 

The  claims  of  the  society  are  further  set  forth  in  a  pamphlet  on 
M  Public  Guarantee  and  Private  Suretyship,"  published  by  its  secretary, 
Mr.  James  Knight 

In  the  year  1841  the  Bank  of  England  took  measures  for  discontinuing 
the  system  of  requiring  sureties  from  the  clerks.  Every  clerk  subscribed 
annually  two  shillings  per  cent,  upon  tHe  amount  of  his  surety  bond. 
When  be  bad  subscribed  in  the  course  of  five  years  (or  immediately,  if  he 
chose)  ten  shillings  per  cent,  the  liability  of  his  sureties  ceased.  Every 
newcle  * 


i,  when  admitted,  ten  shillings  per  cent,  on  the  amount 
of  the  bond  be  would  otherwise  give.  These  contributions  are  invested  in 
the  Three  per  Cent  Reduced,  or  Consols.  This  fund  is  fixed  at  £  6,000 
slock.  When  at  this  amount,  the  interest  is  given  to  the  "Clerks' 
Widows'  Fund,"  a  fund  established  by  the  clerks,  with  the  assistance  and 
•inoufl  of  the  bank.  When  the  claims  have  reduced  the  guarantee  fund 
below  £  6,000,  the  interest  goes  to  this  fund  until  it  has  increased  to  this 
amount  If  the  claims  reduce  the  fund  so  low  as  £  4,700,  then  the  clerks 
are  required  to  make  a  further  contribution  until  the  fund  is  again  raised 
to  £6,000.  But  this  contribution  is  never  more  than  two  shillings  per 
cent  per  annum  on  the  amount  of  their  respective  bonds.  Nor  can  any 
claim  be  brought  against  the  fund  greater  than  the  amount  of  the  bond 
that  would  hare  been  required  from  the  defaulter.  The  clerks  still  give 
their  personal  bonds,  which  are  for  the  full  amount  of  their  deficiencies. 
TAjsisan  admirable  plan  for  a  large  establishment.  In  adopting  it,  the 
***clDra  fcnre  sjhown  a  sound  discretion,  as  it  makes  all  the  clerks  inter- 
ested in  watching  over  one  another.  At  the  same  time,  they  have  mani- 
fested that  ktnrfness  and  goodwill  which  have,  we  believe,  at  all  times  dis- 
tinguished the  directors  of  the  Bank  of  England  in  their  conduct  towards 
•WIT  OsBffcs 

V.  The  System  of  Promotion. 

It  need  hardly  be  observed  that  some  posts  in  a  bank  are  more  import- 

136 


Promotion  of  Clerks. 

ant  than  others ;  and  it  is  always  desirable  that  the  most  clever  men 
should  occupy  the  most  important  posts.  This  object  is  desirable,  but 
how  is  it  to  be  attained  ? 

The  three  main  divisions  of  employment  in  a  London  bank  are,  the 
cashier's  department,  the  accountant's  department,  and  the  teller's  or  out- 
door department.  All  the  clerks  enter,  in  the  first  instance,  in  the  tellers' 
department,  and  their  first  duties  comprise  the  collection  of  the  payment 
of  bills.  The  senior  tellers  are  occupied  within  doors  in  various  duties 
connected  with  the  out-door  operations.  From  this  department,  as  vacan- 
cies occur,  the  clerks  are  promoted  to  higher  posts  in  either  the  cashiers' 
or  the  accountant's  department. 

It  is,  of  course,  only  in  large  banks,  where  there  is  necessarily  a  great 
subdivision  of  labor,  that  these  three  departments  exist  in  a  separate  form. 
In  smaller  banks,' though  the  duties  are  the  same,  yet  one  clerk  may,  in 
one  day,  perform  duties  belonging  to  each  of  the  three  departments. 

The  Cashiers'  Department.  —  The  cashiers  *  of  a  bank  stand  at  the 
counter,  and  attend  to  the  public.  These  officers,  in  Scotland,  are  called 
tellers ;  but  in  Scotland  their  duties  are  less  important,  as  tellers  pay  no 
cheques  until  they  have  been  marked  by  the  accountant,  who  is  their  su- 
perior officer.  We  should  form  a  very  inadequate  idea  of  a  cashier  in  a 
London  bank,  if  we  considered  him  only  as  a  mere  counter  of  money. 
Quickness  in  counting  .money  is  indeed  one  very  necessary  qualification. 
But,  besides  this,  he  should  have  such  a  mental  organization  that  he  can 
recollect  the  general  average  of  each  customer's  balance,  so  as  to  be  able 
to  pay  their  cheques  without  a  too  frequent  reference  to  the  ledger- 
keeper.  He  should  also  possess  a  quickness  of  eye  in  detecting  forged 
signatures.  —  a  self-possession,  so  as  to  be  cool  and  collected  when  the 
counter  is  thronged  with  people,  —  a  command  of  temper,  so  as  not  to  be 
irritated  by  undeserved  reproach,  —  and  not  only  a  general  courtesy  of 
manner  towards  the  public,  but  a  peculiar  urbanity  towards  the  customers 
of  the  bank,  with  a  readiness  and  an  anxiety  to  promote  their  convenience 
in  any  matter  on  which  they  may  require  information  or  advice.  In  fact, 
it  may  justly  be  said,  that  there  is  no  class  of  clerks  on  which  the  reputa- 
tion of  a  bank  with  the  public  so  much  depends  as  on  the  cashiers.  And 
hence,  in  London  banks,  those  clerks  who  are  deemed  the  quickest,  the 
most  able,  and  the  most  gentlemanly,  are  usually  promoted  to  this  office. 

The  Accountants  Department  refers  to  the  keeping  of  the  books  and 
the  accounts.  The  main  qualifications  for  the  clerks  in  this  department 
are,  good  hand-writing,  accuracy  in  figures,  and  method  in  the  arrangement 
of  their  work.  Slowness  is  no  positive  disqualification,  provided  it  be  as- 
sociated, as  it  often  is,  with  application  and  perseverance.  An  accountant 
is  not  compelled  to  do  any  given  quantity  of  work  within  a  given  time. 
By  a  proper  arrangement  of  his  duties,  he  can  usually  contrive  to  keep 
himself  pretty  equally  employed  during  the  whole  of  the  day,  and  on  busy 
occasions  he  can  perform  what  remains  in  the  evening,  after  the  hours  of 
public  business.  A  steady  perseverance  is  of  the  first  importance.  But 
we  must  distinguish  between  those  qualities  required  in  the  clerks  of  the 
accountant's  department,  and  those  required  in  the  accountant  himself. 
*  In  the  United  States  termed  Tellers.  —  Ato.  EDITOR. 
L*  137 


A  Trratiu  on  Banting. 

The  chief  accountant  in  a  bank  is  not  a  mere  book-keeper.  It  is  ont 
thing  to  keep  a  set  of  books  previously  prepared  and  arrangrd,  mid  an- 
otbsr.to  frame  a  set  of  hooks,  or  a  new  system  of  book-keeping,  adopted 
for  aBT  operation  that  is  proposed  to  bo  carried  on.  In  tin  l.-.n.-r  case, 
insnMd  powers  are  required  that  are  by  no  means  common.  And  even 
where  a  system  is  established,  the  chief  accountant  of  a  bank  will  often 
have  occasion  to  ooosidor  the  best  way  of  passing  certain  tnms:i<-tii.ns 
through  the  books,  of  framing  abstracts  of  operatiotiH  which  the  books 
gkgv  not  Mtmediattly  supply,  of  making  difficult  calculations,  and  of  ex- 
atnawtg  lagoritrr  sn4  complicated  accounts,  and  exhibiting  them  with 
c If* rues*  ap3  brevity.  A  good  system  of  book-keeping,  and  a  clc;ir- 
hraded  accountant,  would  have  prevented  many  a  bank  from  stopping 

Prom  this  statement  of  the  qualifications  of  cashiers  and  accountants,  it 
will  appear  that  most  clerks  will  be  more  fitted  for  one  office  than  the 
other,  and  h  is  desirable  that  each  clerk  should  be  placed  in  the  depart- 
aneat  for  which  he  is  best  adapted.  Where  there  is  no  peculiar  adaptation, 
and  where  there  is  no  marked  difference,  among  the  clerks,  the  promo- 
tion should  go  according  to  seniority,  —  not  seniority  in  regard  to  age,  hut 
seniority  according  to  the  time  they  have  been  in  the  bank.  But  it  will 
en,  not  only  in  the  first,  but  also  in  subsequent  steps  of  ad- 
that  the  clerk  who  is  entitled  to  a  vacant  post  by  length  of 
is  not  so  well  qualified  for  it  as  some  of  his  juniors.  But  even  in 
this  ease,  the  individual  should  not  be  passed  over,  if  he  can  perform  the 
duties  with  an  average  degree  of  efficiency.  Should  he,  however,  be 
wholly  unqualified,  or  fall  below  mediocrity  in  his  qualifications  for  the 
office,  there  should  be  no  hesitation  in  promoting  over  him  some  other 
clerk  batter  adapted  for  the  office.  As,  however,  all  such  cases  will  give 
rise  to  some  suspicion  of  favoritism,  and  as  the  party  who  is  passed  over 
is  sure  to  think  himself  unfairly  treated,  it  is  desirable  that  the  clerk 
thus  promoted  should  possess  such  a  marked  superiority  over  the  other, 
that  no  doubt  can  exist  of  the  justice  and  propriety  of  the  arrangement. 
On  this  subject,  we  again  quote  Mr.  Taylor's  "  Statesman  "  :  — 

•  Tn*  claims  of  promotion  are  twofold  :  first,  merit ;  second,  length  of  service.  And 
tfce  diaVwlties  to  be  eosMJdered  are  those  which  arise  when  these  claims  clash ;  that  is, 
whsa  (fee  most  matiloriomi  officer  it  not  he  who  has  served  the  longest  And,  hnvin- 
regard  to  UM  large  public  interests  and  the  deep  individual  conn-rumens  with  which 
they  deal,  it  may  be  stated  broadly,  as  a  general  rnle,  that  merit,  or  in  other  words,  in- 
mmMosM  abflky,  sboald  be  toe  one  essential  consideration  to  be  regarded  in  their  pro- 
Bat  4s  sjeestkm  tbea  arises,  Will  the  judge  be  always  incorrnptihle  and  in- 
bow  are  injustice,  favoritism,  and  abusive  promotioi 


|    Aad  if  sot,  how  an  injustice,  favoritism,  and  abusive  promotion  to  be 

ve.  is,  that  there  can  be  no  perfect  protec- 
(like  most  other  principles)  resolves  itself 
•  ti-.ii  will  be  adequate  in  the  main,  if  the 
by  merit,  at  agstnst  seniority,  be  applied  only  where  there  is  a 
of  merit.    For  there  are  divers  securities,  each  of  which  may  be 
•poo,  the  aggregate  of  which  will  afford  in  the  main  all  Imt 
tae  difltmctoon  of  merit  in  marked.    If  motive*  of  favoritism  he  at 


work,  the  mo*  sals  and  Metal  oncer  will,  at  all  events,  have  a  fair  chance  of 
*•  mvoriM.    Bert  if  be  labor  aadsr  some  defect  (as  nnsightliness,  ill  manners,  Ac.), 
Tst  impairing  Us  public  Btility,  tends  to  throw  him  out  of  favor,  he  will 
mws  .mat  hold  apoa  the  stlflstarwt  of  bis  principal,  which  be  wants  upon 


Discipline. 

his  good  will.  Farther,  of  this  intellectual  order  of  men,  there  will  hardly  ever  be  ten 
brought  together,  of  whom  one  will  not  have  a  generally  acknowledged  superiority  to  the 
rest.  Even  the  vanities  of  men  make  them  just,  as  umpires ;  and  he  who  cannot  pre- 
tend to  postpone  nine  others  to  himself,  will  not  consent  to  postpone  himself  to  any 
but  the  best  of  the  nine.  It  will  be  found,  then,  that  a  man's  reputation  amongst  his 
fellows  in  an  office  will  seldom  fail  to  be  according  to  his  deserts,  and  that  where  the 
superiority  is  marked,  the  award  of  common  repute  will  be  both  just  and  decisive ;  and 
being  so,  it  will  rarely  happen  that  the  patron  will  be  induced  by  any  motive  of  favorit- 
ism to  brave  the  reproach  of  disregarding  it.  In  short,  it  is  the  nature  of  industrious 
ability,  acting  through  various  methods  and  upon  various  motives,  to  vindicate  its  own 
claims  under  any  system  in  which  those  claims  are  recognized ;  and  the  system  which 
shall  conform  to  this  natural  tendency,  and  be  so  framed  as  to  legitimate  tile  rising  of 
what  is  buoyant,  will  be  found  to  work  the  best. 

"  There  is,  however,  a  certain  moderating  hand  to  be  applied,  even  in  the  preferment 
of  merit.  Except  in  urgent  and  peculiar  cases,  in  cases  of  extreme  necessity  on  the 
part  of  the  service,  or  extraordinary  endowments,  and  character  also,  on  that  of  the  in- 
dividual, preferment  should  proceed,  as  Lord  Bacon  teaches,  'per  gradus,  non  per  saltus? 
For,  besides  the  ordinary  evds  attendant  upon  sudden  elevations,  it  should  be  observed 
that  the  hope,  and  not  the  fact,  of  advancement  is  the  spur  to  industry ;  and  that  by  a 
large  dispensation  of  reward  at  once,  which  cannot  be  followed  by  like  rewards  in  fu- 
ture, the  patron  sinks  his  capital,  and  forestalls  that  revenue  of  reward  which  should 
furnish  him  with  resources  of  inducement  through  successive  years.  Moreover,  if  a 
man  be  advanced  largely  at  once,  there  will  not  only  be  little  room  left  for  his  further 
promotion,  but  that  little  room  will  seem  less  when  measured  upon  the  scale  to  which 
his  ambition  will  now  expand  itself;  for  he  who  has  advanced  by  a  stride,  will  not  be 
content  to  advance  afterwards  by  steps." 

VI.  The  Rules  of  Discipline. 

As  the  discipline  of  the  office  must  depend  very  much  upon  the  chief 
clerk,  a  description  of  his  duties  will  describe  many  of  the  duties  of  the 
other  clerks. 

The  office  of  chief  clerk  requires  qualifications  of  no  ordinary  kind. 
It  need  hardly  be  said  that  he  should  possess  a  thorough  knowledge  of  the 
business  of  the  office.  He  ought  also  to  possess  certain  moral  qualifica- 
tions, such  as  a  command  of  temper,  a  love  of  order  and  regularity,  a 
rigid  adherence  to  discipline,  accompanied  by  kindness  of  disposition 
and  of  manners  towards  his  colleagues,  a  gentlemanly  and  courteous  de- 
meanour, and,  above  all,  he  will  be  expected  to  exemplify  in  his  own 
conduct  those  precepts  it  may  become  his  duty  to  inculcate  upon  others. 

The  following  are  the  principal  duties  of  a  chief  clerk :  — 

To  see  that  the  clerks  come  at  proper  time  in  the  morning,-are  not 
absent  unnecessarily  during  the  day,  and  that  they  do  not  leave  the  bank 
at  night  until  they  have  finished  their  work.  To  see,  by  occasional  in- 
spection, that  all  the  books  of  the  office  are  kept  in  a  proper  manner ;  and 
where  he  finds  this  not  to  be  the  case,  to  give  such  instructions  and  ad- 
monitions as  the  circumstances  may  require.  To  see  that  during  the  day 
the  counter  is  properly  appointed,  and  that  no  delay  takes  place  in  attend- 
ing to  the  wants  of  the  public.  For  this  purpose,  it  is  desirable  that  his 
desk  should  be  so  placed  as  to  command  a  view  of  the  counter.  To  see, 
by  occasional  inspection,  that  the  customers'  books  are  written  up  in  a 
proper  manner ;  and  in  case  of  complaint,  he  will  personally  investigate 
the  matter,  and  explain  it  to  the  customer.  To  see,  early  in  the  morning, 
that  the  balance  was  correct  on  the  preceding  night ;  and  when  otherwise, 
he  will  himself  attend  on  the  second  or  third  evening,  and  direct  that 

139 


A  Treatue  on  Bmking. 

proper  meaea  be  employed  to  discover  the  difference.  To  count,  at  such 
tMMSM  may  be  deemed  proper,  the  \\w\v-\  <>f  the  several  cushion,  and 
when  necessary  to  report  thereon  to  the  banker.  To  sec  that  all  tin-  ofli- 

.  ...  ,..;  .,,<;,•  >}..  ,,,..  \,  -  vuanl-  r.-i.-h  otlii-r  ntxl  the  piihlic  in 
a  courteous  end  gentlemanly  manner,  and  to  maintain  throughout  tin* 
efltoe  a  proper  state  of  discipline  and  subordination.  To  take  charge  of 
the  stationery  mad  other  matters  us«-d  in  the  office,  and  to  prevent  any  loss 
or  waste  of  any  portion  of  the  property  of  the  hank. 

Besides  the  points  of  discipline  hinted  at  in  the  ahove  description,  there 
ere  others  that  may  require  more  particular  notice,  as 

Pmehudily  of  Attendance. —  To  insure  punctuality  of  attendance  in 

the  morning,  some  banks  adopt  the  practice  of  keeping  a  book,  in  which 

every  clerk  writes  his  name  on  his  arrival ;  and  when  the  time  has  ex- 

i  line  is  drawn,  which  shows  who  has  arrived  in  time  and  who  has 

arrived  l.v 

Punctuality  of  attendance  is  an  index  of  character.  It  may  fairly  be 
isjfcrred  that  those  who  are  the  most  punctual  in  the  morning  will  be  most 
attentive  to  their  duties  during  the  day  ;  that  they  have  formed  the  most 
Millar  habits,  and  are,  consequently,  the  most  deserving  of  promotion. 


Those,  too,  who  are  the  most  punctual  are  the  most  deserving  of  occa- 


sional holidays.  They  who  are  habitually  late  must  be  regarded  as  hav- 
ing chosen  to  take  their  holidays  by  piecemeal  each  day,  and  they  can 
therefore  hare  no  claim  to  other  holidays  besides.  In  all  applications  for 
promotion  or  leave  of  absence,  it  is  deserving  of  inquiry,  whether  the 
party  is  usually  punctual  in  his  attendance.  With  regard  to  absence  from 
illness,  it  cannot  be  supposed  for  a  moment  that  any  clerk  would  pretend 
to  be  ill  when  he  is  not  so,  in  order  to  have  an  excuse  for  absenting  him- 
self from  the  bank.  An  act  of  this  kind  would  show  such  a  want  of  per- 
sonal honor  ee  should  be  a  disqualification  for  holding  any  oil  ice  in  a 
bank. 

M  Few  things  occasion  more  dissatisfaction  and  annoyance  to  the  supe- 
riors in  a  bank  than  the  absence  of  clerks  on  every  slight  attack  of  illness. 
Unless  a  clerk  feels  himself  quite  unable  to  perform  his  duties,  it  is  very 
injudicious  for  him  to  absent  himself.  It  interferes  with  his  promotion,  for 
h»  superiors  will  be  reluctant  to  advance  him  to  any  post  where  his  ab- 
sence would  be  more  inconvenient  than  while  ho  is  engaged  in  an  inferior 
situation.  In  addition  to  this,  the  superior  in  the  office  may  attribute  the 
attack  of  *  bile  *  or  4  indigestion '  to  the  indulgence  of  a  convivial  taste, 
which  it  will  be  well  for  a  clerk  to  avoid  obtaining  a  character  for.  And, 
under  any  circumstances,  a  man  who  continues  at  his  post  as  long  as  he  is 
able,  will  stand  much  higher  in  the  estimation  of  those  with  whom  he  is 
engaged,  than  he  who  forsakes  his  duties  on  every  trivial  occasion." 
(MM  BaaJftr't  Clerk,  p.  151,  an  excellent  little  work,  published  as  one 
of  the  series  in  the  Guide  to  Service,  by  Mr.  Charles  Knight.) 

A  clerk  should  take  care  of  his  own  health.  We  think  it  is  better  for 
bJMjp  eiend  than  to  sit  at  his  work.  His  desk  should  be  raised  to  such  a 
height  that  he  can  do  this  without  stooping.  He  should  at  all  times  avoid 
pressing  hb  chest  *gjunst  the  edge  of  the  desk,  as  that  may  produce  se- 
The  post  most  friendly  to  health  is  that  of  cashier. 
140 


Punctuality. 

He  is  generally  standing ;  his  attention  and  mental  faculties  are  in  more 
constant  activity,  and  he  is  obliged  to  talk,  which  is  useful  to  the  lungs. 
It  may  be  doubted  whether  the  exercise  of  the  intellectual  faculties,  when 
not  carried  to  excess  nor  attended  with  anxiety,  is  ever  injurious  to  health. 
Those  mental  operations  which  are  connected  with  the  office  of  a  bank 
clerk  are  in  themselves  beneficial.  It  is  the  confinement,  the  impure  air, 
and  the  keeping  of  the  body  too  long  in  one  posture,  that  affects  the 
health.  Hence,  clerks  should  live  at  a  distance  from  the  bank,  and  walk 
to  and  fro.  If  they  reside  at  the  bank,  they  should  take  exercise  in  the 
open  air,  either  in  the  morning  or  the  evening.  When  the  weather  is 
bad,  they  can  walk  up  and  down  the  room,  with  the  windows  open.  Any 
kind  of  amusement  that  should  throw  the  body  into  a  variety  of  attitudes, 
would  be  useful.  Singing  is  friendly  to  health,  if  not  carried  to  excess, 
nor  practised  in  confined  or  crowded  apartments.  Boating,  in  modera- 
tion, is  serviceable.  Gardening  is  highly  beneficial.  A  clerk  who  wishes 
to  enjoy  good  health  should  never  keep  late  hours,  nor  get  into  debt,  nor 
gamble  in  the  funds.  He  should  also  have  a  hobby,  that  is,  some  kind  of 
fixed  amusement  to  employ  his  time  when  absent  from  the  bank,  in  order 
to  change  the  current  of  his  thoughts,  and  to  counteract  those  evils  that 
sometimes  arise  from  a  monotony  of  occupation.  If  this  hobby  should  be 
of  a  kind  to  be  useful  or  instructive  as  well  as  recreative,  all  the  better. 
The  great  disease  against  which  he  should  guard  is  consumption.  He 
will  be  more  subject  to  this  in  youth  than  in  more  advanced  age.  And  it 
has  been  remarked  that  healthy  young  men,  fresh  from  the  country, 
when  appointed  clerks,  have  become  more  susceptible  of  consump- 
tion than  less  robust  persons  who  have  been  seasoned  by  a  residence  in 
London. 

The  Bank  of  England  have  a  medical  gentleman  who  attends  at  the 
bank  one  hour  every  day.  He  is  employed  by  the  directors  upon  matters 
connected  with  the  health  of  their  clerks.  Every  clerk,  when  appointed, 
is  examined,  to  ascertain  that  he  is  in  good  health.  If  he  applies  for  leave 
of  absence  on  the  ground  of  ill  health,  he  undergoes  a  medical  examina- 
tion. If  absent  from  illness,  he  is  visited  by  the  bank  surgeon,  who  re- 
ports to  the  directors  upon  the  nature  of  his  complaint,  and  its  probable 
duration.  If  a  clerk  complains  that  his  employment  is  injurious  to  his 
health,  he  is  examined,  and  in  some  cases  his  employment  is  changed. 
If  he  applies  for  a  pension  on  account  of  age  or  illness,  he  is  also  ex- 
amined. In  each  of  these  cases  a  formal  medical  report  is  drawn  up,  and 
laid  before  the  directors.  The  present  surgeon  is  Mr.  Alfred  Smee, 
F.  R.  S.,  of  Finsbury  Circus,  a  son  of  the  chief  accountant  of  the  bank. 
It  is  not  his  duty  to  prescribe  for  the  clerks  ;  but  in  the  case  of  the  porters 
or  messengers,  he  acts  as  their  medical  attendant,  and  is  paid  by»the 
bank. 

It  is  worthy  of  inquiry,  whether  this  excellent  arrangement  might  not 
be  extended,  and  adopted  by  other  banking  institutions.  Why  should  no> 
every  large  company  give  a  fixed  salary  to  a  medical  man  to  attend  to  the 
health  of  all  their  clerks  ?  This  would  often  be  useful  in  preventing  ill- 
ness, or  in  checking  its  first  approaches.  It  would  thus  preclude,  in  some 
cases,  those  inconveniences  which  are  now  felt  through  the  absence  of 

141 


A  TVssriM  on  Banking. 

clerks ;  white  it  would  be  a  boon  to  the  establishment,  and  save 

them  what,  in  some  inurm***.  must  be  a  heavy  item  of  expense. 

It  ig  dfttfriHfr,  on  several  accounts,  that  all  the  officers  of 

especially  those  who  are  intrusted  with  cash  or  other  prop- 
once  a  yew  have  leave  of  absence  for  at  least  a  week  or  a 

This  fhfftM  not  even  be  optional ;  it  ought  to  be  a  fixed  rule 

vim  which  they  should  be  expected  to  comply.    These  absences  should  be 
arranged  to  **fcm  place  at  those  seasons  of  the  year  when  they  will  be  of 

•.•.;•,,:.,;..-.•:,,  :'!,.•  !,;.-. ne-x,,!' the  kink.     These  holidays  outfit 

to  he  rosjiJiljT  granted  on  the  ground  of  kindness  and  humanity  ;  but  u  In -re 
do  not  exist,  motives  of  self-interest  alone  would  prompt  a 
in  such  applications.  In  the  first  place,  a  great  in- 
is  often  experienced  in  large  establishments  from  the  illness 
of  the  clerks  when  they  are  denied  proper  seasons  of  relaxation.  In  this 
ease,  the  test  of  time  from  ill  health  is  greater  than  that  which  would  be 
oooasionrid  by  holidays.  A  sick  clerk,  even  when  he  attends  to  his  du- 
ties, is  neither  so  quick  nor  so  correct,  nor  can  he  get  through  so  much 
work,  as  a  clerk  who,  by  proper  recreation,  has  been  kept  in  perfect 
health.  These  occasional  holidays  tend  very  much  to  improve  the  efficien- 
cy of  an  office.  When  a  clerk  is  absent,  the  next  in  seniority  takes  his 
place ;  and  when  all  the  clerks  have  been  absent  in  turn,  every  duty  in 
the  bank  becomes  perfectly  familiar  to  at  least  two  persons,  so  that  in  the 
i  of  those  absences  which  airse  from  unavoidable  causes,  little  inconve- 
i  comparatively  is  felt  But  while  the  bunk  is  thus  rendered  inde- 
nt of  any  one  individual,  it  must  not  be  supposed  that  the  absence 
of  a  clerk  lessens  the  importance  attached  to  his  services.  When  a  clerk 
is  really  efficient,  an  occasional  absence  renders  his  value  more  apparent, 
and  increases  the  estimate  formed  of  his  character ;  while  the  indulgence 
he  has  received  will  stimulate  his  energies  and  increase  his  desire  to 
resjdei  himself  more  than  ever  useful  to  his  principals. 

Another  advantage  to  a  banking  establishment  from  the  absence  of 
their  clerks  is,  that  it  furnishes  an  additional  guarantee  for  their  honesty. 
We  have  known  instances  of  frauds  being  carried  on  for  several  years  by 
clerks  who  were  constant  in  their  attendance,  while  a  single  day's  absence 
would  necessarily  have  led  to  a  detection  of  their  dishonesty.  When  a 
clerk  takes  his  holidays,  all  the  property  under  his  care  is  given  over  into 
other  hands,  and  the  knowledge  that  he  will  be  called  upon  to  do  this 
periodically,  may  deter  him  in  the  first  instance  from  commencing  a 
career  which  must  thus  be  necessarily  exposed. 

The  following  is  stated  in  a  city  article  of  the  Time*  to  be  the  arrange- 
of  the  Bank  of  England  on  this  subject :  — 

"  It  b  mot  reoendly  known  that  the  Bank  of  England  hare  recently  entered  into  an 
t  by  which  all  the  penons  on  the  establishment  are  allowed  leave  of  ab- 


ssstscsa*  twy  JMT,  the  holiday  varying  in  length  according  to  the  length  of  service. 
Tfr^csrrr^osi  mm  pisa.  She  whole  number  of  persons  U  divided  into  four  portion*,  and 
essBjS^SMSB  fovr  portion*  take*  the  vacation  in  one  of  the  four  periods  of  i 
*•*•»»»*  **js  ssjjacei^of  ihe  dividend*,  and  precede  the  shutting,  these  being  the  pe- 
*T*J?  *??  yU?***  bsstasss  U  done.  So  complete  is  the  system,  tlmt  tin;  parties 
iMr  hoUdar  la  dtt  •srtag  quarter  one  year,  take  it  in  the  summer  (juurtcr 
..-•V  «!..!  B><  :i  AfOSffc  :ill  the  four,  I 


that  one  may  not  have  an  an  fair 
142 


Bank  Books. 

advantage  over  the  other.    The  shortest  holiday,  we  understand,  is  about  nine  days, 
and  the  longest  about  three  weeks." 

Customers'1  Books.  —  It  should  be  a  great  object  with  the  chief  clerk  to 
see  that  the  customers'  books  are  written  up  correctly  and  neatly,  in  a 
good  hand-writing,  and  free  from  blots  or  erasures.  These  are  the  only 
books  that  go  out  of  the  bank,  and  therefore  they  are  the  chief  means  by 
which  the  customers  can  judge  as  to  the  manner  in  which  the  business  of 
the  office  is  conducted.  It  is  not  advisable  that  the  writing  up  of  these 
books  should  be  left  to  the  junior  clerks.  They  should  be  placed  in  the 
hands  of  clerks  of  some  standing.  The  same  book  should  always  be 
written  up  by  the  same  clerk  ;  and,  when  it  can  be  so  managed,  the  credit 
and  debit  side  should  both  be  in  the  same  hand-writing.  One  of  the  best 
writers  in  the  office  should  be  appointed  to  this  post,  and  his  salary  should 
be  proportionate  to  its  importance. 

It  is  the  practice  of  all  bankers  to  let  the  customers'  book  be  a  copy  of 
the  ledger  with  the  sides  reversed  ;  thus  the  credit  side  of  the  ledger  is  the 
debit  side  of  the  customers'  book.  The  reason  assigned  for  this  is,  that 
the  ledger  is  the  banker's  account  against  his  customer,  and  the  book  is 
the  customer's  account  against  the  banker.  Hence  the  customer,  when 
he  looks  at  his  book,  has  at  his  left  hand  the  sums  with  which  he  has  de- 
bited his  banker,  and  at  his  right  the  sums  which  are  to  the  banker's 
credit. 

Cashier's  Deficiencies.  —  It  cannot  be  expected  that  a  cashier  can  re- 
ceive and  pay  away  money  for  a  whole  year,  and  yet  never  make  any 
mistakes.  Some  deficiencies  will  be  sure  to  arise.  Each  cashier  is  con- 
sidered liable  to  make  good  his  own  loss.  But,  to  meet  these  deficien- 
cies, some  banks  allow  to  each  cashier  a  certain  sum,  —  say  £  20  or  £  30 
per  annum,  —  which  is  called  risk-money.  Others  pay  such  deficiencies 
as  may  arise  during  the  year,  giving  an  admonition  to  any  cashier  whose 
deficiencies  are  unusually  large.  Superior  accuracy  in  this  respect  is  also 
considered  as  one  test  of  superior  merit,  and  therefore  as  forming  one 
claim  to  promotion.  When  a  cashier  takes  his  holidays,  he  delivers  up 
his  cash  to  the  chief  clerk,  who  counts  it  and  sees  that  it  is  correct,  and 
then  delivers  it  to  the  clerk  who  is  to  act  for  the  cashier,  who  signs  an 
acknowledgment  in  the  money-book  that  he  has  received  the  right  amount. 
The  cashier,  on  his  return,  will  make  a  similar  entry.  It  is  said  to  be  the 
practice  in  some  establishments  for  the  chief  clerk  to  count  the  cash  of 
all  the  cashiers  every  Saturday  night.  But  when,  from  the  extent  of  the 
business,  this  cannot  be  done,  he  counts  the  cash  of  each  cashier  individu- 
ally, at  such  times  as  may  be  most  convenient  to  himself,  giving  the 
cashier  no  previous  notice  of  his  intention  to  do  so.  He  immediately  re- 
ports to  the  banker  any  deficiency  he  may  discover.  In  all  banks  it  is 
understood  that  the  cashier  is  not  allowed  to  apply  any  part  of  the  bank 
money,  even  temporarily,  to  his  private  use,  nor  to  lend  any  sum,  however 
small,  to  the  other  clerks,  upon  their  I.  O.  U.s  or  other  engagement. 
Any  violation  of  this  rule,  though  with  no  fraudulent  intention,  is  consid- 
ered a  sufficient  ground  for  instant  dismissal. 

Gambling  in  the  Funds,  or  in  Shares.  —  Some  banks  make  it  a  rule  to 
dismiss  any  clerk  that  is  found  to  be  engaged  in  transactions  of  this  kind. 

143 


A  TVesrtM  on  Banking. 

The  erfl  effects  of  such  practice*  are  Tcry  great  Speculative  engage- 
mm*  will  lurioirily  distract  their  minds,  and  draw  their  mti •utinn  : 
their  official  dutiea.  If  unfortunate,  thrir  personal  comforts  may  be  di- 
minished: they  may  incur  debts  that  will  require  years  of  saving  to  liqui- 
date* or  they  may  be  tempted  to  actions  which  would  ruin  themselves  and 
dB*nce  their  families 

VII.  The  Training  of  Clerks  for  higher  Offices. 

Whatever  natural  talents  a  young  man  may  have  when  he  enters  a 
bank,  he  cannot  be  expected  to  perform  his  duties  well  until  IK-  has  been 
instructed.  There  is  a  good  way  and  a  bad  way,  a  quick  way  and  a  slow 
way,  of  performing  even  the  most  simple  operation.  Incorrect  or  slovenly 
habits,  when  once  acquired,  are  not  easily  abandoned.  When,  therefore, 
a  young  man  enters  a  bank,  he  should  be  placed  under  the  tuition  of  an- 
Other  clerk,  well  qualified  to  instruct  him  with  regard  to  all  his  immediate 
dutic*.  It  is  also  desirable  that  the  chief  clerk  should  not  have  much 
ifftT"**!  labor,  but  should  have  leisure  to  walk  round  the  office,  stand  for 
awhile  at  the  elbow  of  each  clerk,  observe  his  peculiar  defects,  and  give 
such  instructions  as  he  may  deem  necessary  or  useful.  The  senior 
clerks  generally  should  also  be  ready  at  all  times  cheerfully  and  courte- 
ously to  give  instruction  to  their  juniors. 

There  are  many  ways  of  ascertaining  the  relative  merits  of  a  clerk. 
There  it  one  obvious  way  ;  that  is,  to  inspect  the  books  which  he  keeps. 
k  can  readily  be  seen  if  they  are  kept  in  a  good  and  neat  hand,  if  there 
are  any  blots  or  erasures,  and  if  they  indicate  any  great  degree  of  care- 
lessness or  otherwise.  Quickness  is  generally  an  evidence  of  cleverness. 
A  clerk  who  can  courfl  notes  very  fast,  or  who  can  cast  up  a  long  column 
of  figures  very  quickly,  and  yet  accurately,  is  generally  a  clever  man. 
Quickness  of  hand  denotes  quickness  of  head,  and  it  will  generally  be 
found  that  these  two  kinds  of  quickness  go  together.  We  do  not  say  that 
this  mechanical  quickness  of  head  proves  soundness  of  judgment,  but 
neither  does  it  prove  the  reverse.  In  a  clerk  it  is  a  decided  recom- 


Another  teat  of  the  cleverness  of  a  clerk  is,  the  opinion  formed  of  him 
by  his  fellow-clerks.  When  men  associate  together  day  after  day  for  a 
number  of  years,  both  their  excellencies  and  their  defects  become  known 
to  each  other,  and  each  man  falls  into  the  position  to  which  his  qualities 
entitle  him.  The  opinion  which  any  one  clerk  expresses  of  the  relative 
merits  of  the  other  clerks  will  generally  be  correct,  when  his  own  interest 
is  not  concerned.  The  opinion  he  may  express  will,  in  fact,  be  the  opinion 
of  the  office,  formed,  not  only  on  his  own  experience,  but  also  on  the  ex- 
perience of  all  the  other  clerks. 

The  report  of  the  chief  clerk  will  generally  express  this  united  opinion 
of  the  office.  But  it  is  well  for  a  banker  to  keep  himself  well  acquainted, 
At  all  times,  with  the  sentiments  generally  entertained  by.  the  chief  clerk 
mpecnng  the  other  clerks,  and  not  ask  his  opinion  merely  when  there  is 
an  opening  for  promotion.  On  these  occasions,  feelings  of  kindness,  or  the 
may  induce  a  chief  clerk  to  speak  of  the  party  in  a  somewhat 
from  that  which  he  would  employ  in  ordinary  times. 
144 


Training  of  Clerks. 

With  a  view  to  the  proper  training  of  clerks,  it  is  desirable  that  there 
should  not  be  too  many  in  proportion  to  the  work.  If  the  clerks  are  un- 
employed for  any  considerable  portion  of  the  day,  their  habits  of  atten- 
tion, of  industry,  and  of  quickness  are  impaired,  so  that  they  do  less  work 
even  in  those  hours  in  which  they  are  occupied.  The  duties  of  each  clerk 
should  be  sufficiently  heavy  to  require  a  continuous  application  of  the 
mind  during  the  whole  of  the  working  hours.  If  a  banker  find  that  the 
clerks  have  time  to  read  books  or  newspapers,  or  to  carry  on  either  gam- 
bols or  quarrels  among  themselves,  during  the  hours  of  business,  he  may 
safely  infer  that  he  has  too  many  hands.  By  reducing  the  number,  he 
will  make  each  clerk  more  efficient,  and  the  work  will  be  better  done. 
He  will  also  be  able  to  increase  their  salaries  individually.  It  is  better 
that  the  same  amount  of  money  should  be  distributed  among  a  smaller 
number  of  effective  men,  than  among  a  larger  number  who  are  less  effec- 
tive. The  amount  of  Christmas  money  received  by  each  will  also  be 
greater. 

For  the  purpose  of  training  the  clerks,  it  is  desirable  that  their  labors 
should  be  so  subdivided  as  that  the  duties  of  one  office  should  be  a  train- 
ing for  the  office  immediately  above  it.  The  clerk,  on  his  entrance  into 
the  bank,  will  thus  have  to  perform  those  operations  that  require  the 
least  degree  of  professional  knowledge,  —  of  knowledge  peculiar  to  the 
business  of  a  bank,  —  and  will  advance  step  by  step  (each  step  requir- 
ing but  a  small  addition  to  his  previous  knowledge)  to  the  higher  posts. 
When  it  is  ascertained  for  which  department — the  cashier's  or  the  ac- 
countant's —  the  teller  is  best  adapted,  he  should  be  put  into  that  post 
the  operations  of  which  will  form  the  best  training  for  those  duties  which, 
when  promoted,  he  will  have  to  discharge. 

The  occasional  absences  of  the  clerks  are  conducive  to  their  improve- 
ment. The  juniors  thus  learn  to  perform  the  duties  of  their  superiors. 
New  arrangements  are  formed  temporarily  for  a  different  division  of  la- 
bor, and,  the  hands  being  fewer,  an  additional  stimulus  is  given  to  exer- 
tion. It  is  also  useful,  when  it  can  be  done,  for  the  clerks  to  change  oc- 
casionally, and  do  each  other's  work.  Every  clerk  should  be  encouraged 
to  suggest  any  improvements  for  abridging  or  facilitating  his  own  labor. 
When  a  bank  has  several  branches,  it  is  often  advisable  that  an  occasional 
absence  at  one  branch  should  be  supplied  by  a  clerk  brought  from  an- 
other branch.  A  good  inspector  of  branches  will  inspect  the  cashfbr's  and 
the  accountant's  department,  as -well  as  the  manager's ;  and  when  he  finds 
any  improvement  at  one  branch,  he  will  introduce  it  into  all  the  other 
branches. 

But  the  greatest  stimulus  to  improvement  in  the  clerks  is  an  impartial 
system  of  promotion.  It  is,  perhaps,  desirable  that  instances  should  occur 
sometimes  of  a  clerk  who  is  entitled  to  a  higher  post,  from  seniority,  being 
unfit  to  take  it,  in  order  to  show  that  superior  merit  is  regarded.  But  it 
should  always  be  obvious  that  the  clerk  who  is  promoted  has  superior 
merit.  If  a  clerk  is  put  over  the  head  of  another  from  favoritism,  or  ca- 
price, on  the  part  of  the  banker,  or  from  the  influence  of  friends,  custom- 
ers, or  shareholders,  or  even  for  qualities  good  in  themselves,  but  not  in- 
creasing his  efficiency  as  a  clerk,  then  will  great  evils  arise  from  his  ap- 
M  145 


was  entitled  to  the  post  from  Moiority 

, -ifiv:  ial  m< 


A  TVwftM  on 
ho  should  bo  M  woll  qualified  as  the  man  who 


of  training  clerks  is  the  daily  balance. 

The  boohf  are  NJanwl  every  night,  before  the  clerks  leave  the  bonk. 
But  mietakoe  will  sjeosjsjarily  occur  during  the  day,  and  to  discover  theae 
will  occupy  a  little  time.  The  total  amount  of  error  is  called  "  the  <lill«  -r- 
•jwe";  tad  to  endeavour  to  discover  the  error  ia  called  "searching 
•Off  the  difference."  Those  clerks  who  arc  thus  employed  in  the  evening 
•re  said  to  be  "  upon  the  balance."  In  large  estnblishim-nts,  it  is  usual 
lo  divide  the  whole  body  of  clerks  into  classes,  who  take  it  in  turn  to  be 
44  upon  the  balance."  By  this  arrangement,  all  those  who  are  not  "  \\\»>\\ 
the  balance  "  can  leave  the  bank  as  soon  as  their  own  work  is  done.  The 
smaller  the  number  of  clerks  on  the  balance,  the  better.  Thus,  in  a  bank 
of  forty-two  clerks,  six  would  bo  sufficient  to  be  on  the  balance.  If 
%  larger  number  —  say  twelve  —  were  retained,  the  juniors  would  do 
iKMhmgt  or  else  they  would  be  employed  on  the  inferior  books,  from 
which  they  would  learn  nothing.  But  when  only  six  are  retained,  they 
must  all  work,  and,  what  is  better  still,  they  must  all  think.  They  will  all 
••quire  a  thorough  knowledge  of  the  whole  system  of  book-keeping,  and 
he  able  to  ascertain  in  what  way  errors  in  one  book  may  counteract  er- 
rors in  another  book,  and  how  the  errors  discovered  will  bear  upon  "  the 
difereooe."  In  large  establishments,  almost  tlie  only  way  in  which  a 
jynr>f  clerk  can  learn  the  whole  system  of  book-keeping,  is  from  Ix-m^ 
44  upon  the  balance."  But  this  is  an  effectual  one.  It  also  gives  him  an 
opportunity  of  showing  his  talents.  Some  clerks  are  far  more  quick  in 
discovering  the  difference  than  others  are  ;  and  this  quickness  is  generally 
a  fair  criterion  of  the  general  talent  of  the  party.  The  clerk  who 
"  skulks  "  the  balance,  avoids  the  best  means  of  improvement,  and  the 
best  opportunity  of  showing  his  talents.  But  such  persons  have  usually 
no  talents  to  show.  A  clerk  who  acts  in  this  way  betrays  a  conscious- 


of being  a  fool. 
e  have  here 


We  have  here  spoken  of  that  kind  of  training  which  is  adapted  to  the 
•asking  of  clever  clerks.  But  as  in  the  joint-stock  banks  a  clerk  may  be- 
come a  manager,  it  is  desirable  that  those  clerks  who  are  deemed  the 
•oat  clever  should  be  put  under  a  course  of  training  that  will,  with  expe- 
rience, qualify  them  for  that  office.  It  is,  in  some  respects,  more  difficult 
to  do  this  in  a  large  establishment  than  in  a  small  one.  In  a  bank  that 
has  forty  clerks,  one  clerk  sees  only  a  fortieth  part  of  its  operations.  In  a 
hank  where  there  are  only  ten  clerks,  one  clerk  sees  a  tenth  part,  and 
may  easily  acquire  a  tolerable  knowledge  of  the  whole.  A  hank  that  has 
many  branches  has  a  great  facility  for  training  clerks  to  become  mana- 
gete.  Whe«  a  branch  manager  is  absent  from  illness,  or  any  other 
cause,  ova  of  the  senior  clerks  of  that  or  some  other  branch  will  take  his 
place,  and  thus  gradually  become  accustomed  to  the  duties  of  the  office. 

The  clerks  thus  selected  for  this  kind  of  training  should  be  young  men 
who  are  quick  aod  efficient  in  the  discharge  of  all  tln-ir  official  duties,  and, 
lossess  a  good  temper,  gentlemanly  appearance  and  manners, 
literary  information,  with  a  desire  of  improving  their  knowl- 
They  should  not  be  young  men  who  have  en- 
146 


Training  of  Clerks. 

tered  the  bank  until  they  can  get  something  better,  but  those  who  look  to 
banking  as  their  profession,  and  are  ambitious  of  attaining  to  the  highest 
posts  in  the  establishment.  But  beyond  the  qualities  we  have  enumerat- 
ed, it  is  necessary,  above  all  things,  that  they  should  have  habits  of 
business. 

"  Habits  of  business  is  a  phrase  which  includes  a  variety  of  qualities,  —  industry, 
arrangement,  calculation,  prudence,  punctuality,  and  perseverance.  And  these  virtues 
are  exercised,  not  from  the  impulse  of  particular  motives,  but  from  habit.  If  you 
hear  a  man  boast  of  being  industrious,  you  may  safely  infer  that  he  does  not  possess 
the  habit  of  industry,  for  what  a  man  does  from  habit,  he  does  mechanically,  without 
thinking  of  the  merit  of  his  actions,  though  they  may  be  highly -meritorious.  Habits 
of  business  are  essential  to  a  merchant.  But  though  essential  to  a  merchant,  they  are 
not  peculiar  to  him.  They  are  as  necessary  to  a  professional  man  as  to  a  merchant, 
—  as  necessary  to  ladies  as  to  gentlemen,  —  as  necessary  for  the  government  of  a 
family  as  for  the  government  of  a  commercial  establishment.  The  greater  the  intel- 
lectual talents  of  the  individual,  the  more  necessary  are  habits  of  business  to  keep  him 
steady  in  his  course.  The  more  canvas  he  spreads,  the  more  ballast  he  requires.  If 
we  examine  the  history  of  those  illustrious  characters  who  have  risen  to  eminence  as 
the  masters,  the  legislators,  or  the  instructors  of  mankind,  we  shall  find  they  have 
been  as  much  distinguished  by  their  habits  of  business,  as  by  the  superiority  of  their 
intellect.  While,  on  the  other  hand,  we  could  easily  point  out,  in  every  science  and 
in  every  path  of  life,  some  young  men  who,  though  of  towering  genius,  have  become 
lost  to  themselves,  and  have  disappointed  the  hopes  of  all  their  friends,  through  a  want 
of  habits  of  business.  They  have  burst  upon  the  world  with  more  than  noontide 
splendor,  they  have  attracted  universal  notice,  they  have  excited  big  expectations,  and 
suddenly  they  have  darted  into  an  oblique  course,  and  passed  into  oblivion."  (Lectures 
on  Ancient  Commerce,  by  J.  W.  Gilbart,  p.  94.) 

If  a  clerk  be  intended  to  be  trained  for  a  manager,  it  may  be  questioned 
whether  he  will  be  improved  by  remaining  a  long  time  as  a  clerk.  The 
two  offices  are  very  distinct,  and  they  call  into  operation  distinct  qualities 
and  operations  of  mind.  A  very  old  banker's  clerk  (unless  he  has 
been  a  chief  clerk)  is  generally,  from  the  very  length  of  his  service,  dis- 
qualified for  being  a  manager.  Seven  to  ten  years'  experience  as  a  clerk 
is  quite  long  enough,  and  after  that  period  the  sooner  he  becomes  a  man- 
ager the  better,  provided  he  has  the  necessary  qualifications.  Even  dur- 
ing that  time  he  should  have  been  occasionally  employed  in  those  opera- 
tions that  require  the  exercise  of  his  faculties  as  a  man  of  business.  It 
has  often  been  said,  that  good  servants  make  bad  masters.  If  this  be 
true,  it  is  probably  the  result  of  an  intellectual  more  than  a  moral  defi- 
ciency. A  lengthened  service  causes  the  mental  faculties  to  move  in  a 
routine  from  which  they  cannot  be  suddenly  aroused  into  an  attitude  of 
independence,  so  as  to  be  able  to  trace  causes  and  effects,  to  balance  op- 
posing considerations,  and  to  engage  in  those  reasoning  processes  which 
are  required  by  the  exercise  of  authority.  Hence  it  is,  that  before  a  clerk 
is  appointed  a  manager,  he  should  undergo  some  kind  of  training.  The 
best  training  for  being  a  manager  is  that  of  being  chief  clerk,  or  of  hold- 
ing an  equivalent  post  next  to  the  manager.  It  will  necessarily  follow 
that  the  holder  of  such  a  post  will  have  occasionally  to  take  the  place  of 
the  manager,  and  the  manner  in  which  he  may  then  act  will  be  a  fair  cri- 
terion by  which  to  judge  of  his  qualifications  for  that,  or  a  similar  sit- 
uation. 

Among  the  means  of  training  clerks  for  superior  offices,  we  should  give 

147 


A  TYvofue  on  Banking. 

t  bifb  nak  to  the  formation  of  a  library  of  banking  books,  to  which  the 
whole  of  the  ostaNianmnnl  should  at  all  times  have  access.  Tin-  n -marks 
in  •  letter,  addressed  to  the  nm  ringer  of  a  country  bank,  in  tin- 


N     .      IN;.;.    ...  •  «>,,,•!,  wts    ;it'f-  ru.ini-    pubhfaed    ill    tin-   sixth    vnhmr   of 

the  Batter*'  AfflgoriiM,  are,  we  think,  not  inapplicable  to  this  MI!.J«  ,-t :  — 
"  1  with  you  would  advise  your  directors  to  celebrate  their  success  by 
•ending  to  each  of  their  branches  monthly  a  copy  of  the  Bankers'  Maga- 
IMM.  It  would  be  sent  direct  from  London,  the  last  day  of  the  month,  I 
believe,  free  of  expense;  and  as  the  number  of  next  month  will  com- 
mence a  new  volume,  they  could  not  begin  at  a  better  time.  I  am  sure 
ibis  would  be  a  profitable  investment  of  Rome  portion  of  your  surplus 
fund*,  and  would  yield  an  ample  return  in  the  results  arising  from  the  in- 
creased knowledge  and  skill  of  your  managers.  Here  they  will  le.-irn 
point*  of  law  and  of  practice,  with  which  they  were  previously  unac- 
quainted, and  be  better  prepared  to  deal  with  such  cases  when  they  occur 
in  their  own  experience.  It  seems  peculiarly  necessary  that  manners  of 
branches,  who  have  not  the  opportunity  of  immediately  consulting  with 
any  of  the  directors,  should  be  supplied  by  the  bank  with  the  means  of 
flfrtaininy  this  kind  of  information.  Losses  are  sometimes  incurred  by 
joint-stock  banks,  through  the  want  of  knowledge  of  a  little  banking  law  on 
the  part  of  their  principal  officers.  The  managers  would  not  be  the  only 
gainers.  The  other  officers  of  the  branches  would  have  the  opportunity 
of  self-improvement ;  and  thus  routine  clerks  might  become  intelligent 
bankers,  and  you  would  train  in  your  own  establishment  a  constant  supply 
of  able  men,  to  take  the  places,  when  necessary,  of  the  existing  managers. 
It  is  one  of  the  excellencies  of  our  system,  that  the  junior  clerks  may  look 
forward  to  being  placed  at  the  head  of  the  establishment ;  but  this  can 
only  take  place  in  those  instances  wherein  the  clerks  endeavour  to  acquire 
that  professional  and  general  knowledge  which  is  necessary  in  the  pres- 
ent  day,  in  order  to  discharge  the  duties  and  maintain  the  position  of  a 
manager.  Unless  they  do  this,  those  who  are  now  clerks  will  remain 
clerks  as  long  as  they  live,  and  the  next  generation  of  managers  will  be 
taken  from  the  more  instructed  classes  of  society.'1 

The  manager  of  a  joint-stock  bank  in  the  midland  counties,  on  whom 
we  called  last  summer,  informed  us  that  his  directors  had  recently  voted 
£  100  towards  the  formation  of  a  bank  library.  To  the  directors  of  other 
banks  we  would  say,  •*  Go  and  do  likewise." 

In  training  clerks  for  intellectual  offices,  it  is  advisable  not  to  give 
them  too  many  instructions  with  regard  to  minute  details.  They  should 
be  taught  to  think  for  themselves.  A  man's  talents  are  never  brought  out 
until  he  is  thrown,  to  some  extent,  upon  his  own  resources.  If,  in  every 
difficulty,  he  has  only  to  run  to  his  principal,  and  then  implicitly  obey  the 
directions  he  may  receive,  he  will  never  acquire  that  aptitude  of  percep- 
tion, and  that  promptness  of  decision,  and  that  firmness  of  purpose,  which 
•*•  aawntially  necessary  to  those  who  hold  important  and  responsible  of- 
*C8B"  T??^  roso^ho  are  backward  in  this  respect  should  be  intrusted 
at  fiat  with  some  inferior  matters,  with  permission  to  act  according  to 
thetr^iscretion.  If  they  act  rightly,  they  should  be  commended ;  if  other- 
wise, they  should  not  be  censured,  but  instructed.  A  fear  of  incurring 


Training  of  Clerks. 

censure,  a  dread  of  responsibility,  has  a  very  depressing  effect  upon  the 
exercise  of  the  mental  faculties.  A  certain  degree  of  independent  feeling 
is  essential  to  the  full  development  of  the  intellectual  character.  It  should 
be  the  object  of  a  banker  to  encourage  this  feeling  in  his  superior  officers. 
Those  bankers  who  extend  their  commands  to  the  minutest  details  of  the 
office,  exacting  the  most  rigid  obedience  in  matters  the  most  trivial, 
harshly  censuring  their  clerks  when  they  do  wrong,  and  never  com- 
mending them  when  they  do  right,  may  themselves  be  very  clever  men, 
but  they  do  not  go  the  way  to  get  clever  assistants.  At  the  same  time, 
they  exhaust  their  own  physical  and  mental  powers  by  attending  to  mat- 
ters which  could  be  managed  equally  well  by  men  of  inferior  talent. 

After  a  clerk  has  become  a  manager,  his  education  has  yet  to  be  com- 
pleted. Lord  Bacon  observes,  that  reading  makes  a  wise  man ;  writing, 
an  exact  man  ;  and  conversation,  a  ready  man.  Whatever  knowledge  he 
may  have  acquired  by  reading  or  otherwise,  however  exact  he  may  have 
been  in  the  discipline  of  the  office,  the  young  manager  has  yet  to  become 
a  ready  man.  He  has  to  apply  his  knowledge  promptly  and  independent- 
ly, and,  at  the  same  time,  wisely.  This  habit  he  will  acquire  by  tindfe. 
The  exercise  of  authority  over  other  men  produces  an  independence  of 
mind  which  is  friendly  to  the  maturing  of  the  understanding ;  while  the 
necessity  for  giving  immediate  decisions  in  conversation  with  his  custom- 
ers will  have  a  tendency  to  produce  promptness  of  judgment.  There  is 
no  profession  in  which  experience  is  more  useful  than  in  banking.  But  it 
is  useful,  not  so  much  in  the  amount  of  knowledge  that  is  acquired 
(though  that  is  important),  as  in  the  improvement  it  imparts  to  those  in- 
tellectual faculties  which  are  called  into  exercise.  It  is  by 'constant  prac- 
tice that  these  faculties  gather  strength.  Habits  are  formed  by  repeated 
acts,  and  they  can  be  formed  in  no  other  way. 

Before  closing  this  section  on  the  administration  of  the  office,  we  may 
observe,  that  although  the  duties  of  a  chief  clerk  are  quite  distinct  from 
those  of  a  banker,  yet  in  small  establishments  they  are  often  performed  by 
the  same  person.  In  branch  banks,  generally,  the  manager  is  both  the 
banker  and  the  chief  clerk.  But  as  the  branch  increases,  the  manag<  r 
will  gradually  transfer  to  the  second  officer  the  duties  of  the  chief  clerk, 
and  confine  his  own  attention  to  those  of  a  banker.  It  is  too  much  the 
practice  in  England  to  view  a  bank  manager  as  holding  the  same  relative 
position  in  a  joint-stock  bank  which  a  chief  clerk  does  in  a  private  bank. 
This  is  an  error.  A  manager  is  not  a  banker's  clerk,  —  he  is  a  banker. 
And  although  he  may  reserve  some  important  cases  for  the  consideration 
of  his  directors,  yet  they  are  usually  such  cases  as  a  private  banker 
would  reserve  for  consultation  with  his  partners,  or  on  which,  had  he  no 
partners,  he  would  take  time  to  form  his  own  determination. 

It  may  also  be  observed,  that  although  the  government  of  the  office 
will  generally  be  left  entirely  to  the  chief  clerk,  and  it  is  not  necessary 
that  the  banker  should  be  made  acquainted  with  all  the  trivial  delinquen- 
cies of  the  clerks,  yet  there  are  certain  acts  of  misconduct  that  must  al- 
ways be  reported,  and  when  reported  must  be  dealt  with  by  the  banker 
himself.  In  a  well-disciplined  establishment  these  cases  will  be  rare,  but 
they  will  occur  sometimes,  and  then  the  mode  of  reproof  or  punishment 
M*  149 


A  Trtatite  on  Banking. 

will  be  rrgulated  by  the  kind  of  ofieace  and  :!i«-  character  of  the  party. 

rv  set  of  dishonesty,  however  trifling  the  amount  purloined,  must  bo 
followed  by  instant  dismissal  Acts  of  delilwrate  disoU-dience  to  orders, 
grass  dbrespect  to  nii|M-nor  officers,  or  acts  of  immorality  that  would 
bring  discredit  on  the  bank,  will  generally  be  vwited  witli  the  same  pnn- 
•hment  But  extreme  puimhmnit  should  IK  indicted  only  in 
oases.  Mere  accidental  errors,  though  they  may  ROIH-  ; .HP-  occasion 
grmt  loss,  must  not  be  treated  in  the  same  way  as  those  faults  which 
M rise  from  gross  neglect,  or  which  imply  a  deficiency  in  personal  honor. 
It  is  generally  a  good  rule,  that  a  hanker  should  not  reprove  a  clerk  in  tlic 
presence  of  the  other  clerk*.  By  following  this  rule,  he  can  adapt  his  re- 
proofs to  the  character  and  position  of.the  party  ;  for  a  valuable  clerk, 
even  when  really  culpable,  is  not  to  be  treated  in  precisely  the  same  way 
as  another  whose  services  are  of  less  importance.  Nor  is  it  any  violation 
of  justice,  that  those  faults  which  arise  from  inadvertence  should  be 
differently  from  those  that  arise  from  bad  habits.  Nor  will  it 

to  impair  the  discipline  of  the  office  should  it  be  known  that  a  good 
will  sometimes  got  a  young  man  out  of  a  scrape,  while  he  who 
had  not  that  good  character  would  be  punished  more  .;•  a  less 

important  offence.  Another  rule  to  be  observed  in  administering  reproof 
is,  in  reminding  a  clerk  of  his  defects,  to  commence  with  telling  him  of 
his  good  qualities.  There  is  a  credit  as  well  as  a  debit  side  in  every 
man's  character;  and  it  seems  hardly  fair  to  run  over  all  the  debit  items, 
and  say  nothing  of  the  other  side  of  the  account.  This  plan,  too,  in 
,  instead  of  diminishing,  the  pungency  of  the  reproof,  while  it  re- 
from  the  mind  of  the  party  any  impression  that  the  banker  is  iiiflu- 
by  motives  of  personal  dislike. 


SECTION  XII.  -  BANKING  BOOK-KEEPING. 

**  ALTHOUGH  the  business  of  keeping  books  is  extremely  easy  when 
once  the  accounts  are  properly  arranged,  yet  the  adaptation  of  the  prin- 
ciple of  double-entry  to  extensive  and  complicated  transactions,  so  as  to 
receive  the  full  benefit  of  the  system,  is  a  process  which  requires  the 
most  complete  knowledge,  not  only  of  the  practice,  but  also  of  the  science, 
of  book-keeping/1 

**  Book-keeping,  like  all  other  arts,  can  only  be  mastered  by  industry, 
perseverance,  and  attention.  The  learner  must  think  for  himself,  and 
endeavour  to  understand  the  why  and  wherefore  of  all  that  he  does,  instead 
of  resting  satisfied  with  vague  notions  and  words  devoid  of  sense." 

14  The  study  of  book-keeping  affords  an  excellent  means  of  intellectual 
discipline;  that  b,  when  its  principles  are  exhibited  as  well  as  their  appli- 
cation.  When  the  reasoning  powers  are  called  into  exercise  as  well  as 
tbememory,  the  student  who  has  carefully  attended  to  the  instructions, 
aixrVbo  is  the  matter  and  not  the  tlaoe  of  rules,  will  experience  ,„,  ,jjfli. 
culty  in  unravelling  or  adjusting  any  set  of  accounts,  however  complicated 
or  diversified."  (Double-Entry  Lluridaled,  by  B.  F.  Foster.) 


LfiO 


Book-keeping. 

We  have  commenced  this  section  with  these  quotations  in  order  to 
quicken  the  attention  of  the  reader  to  a  subject,  which,  by  those  who  do 
not  understand  it,  is  considered  complicated,  and  by  those  who  do  under- 
stand it,  is  considered  dull.  It  is,  in  fact,  neither  the  one  nor  the  other. 
But  still  it  is  a  subject  on  which  it  is  difficult  to  write  in  such  a  way  as 
to  avoid  the  possibility  of  being  misunderstood.  We  purpose  in  this 
section :  — 

I.  To  notice  those  Preliminary  Operations  with  which  a  young  Book- 
keeper should  become  acquainted. 

II.  To  describe  the  system  of  Banking  Book-keeping  as  published  in 
the  former  edition  of  this  work. 

III.  To  state  those  Improvements  of  which  this  system  has  been  found 

to  be  susceptible. 

IV.  To  trace  the  Resemblance  between  Banking  Book-keeping  and 

Mercantile  Book-keeping. 

I.  Preliminary  Operations. 

When  a  young  man  enters  a  bank  as  a  clerk,  he  should  be  instructed 
to  be  careful  with  regard  to  his  hand-writing,  or,  in  his  anxiety  to  write 
fast,  he  may  forget  to  write  well.  If  he  write  a  bad  hand,  he  should  not 
be  above  taking  a  few  lessons  from  a  professor  of  penmanship,  who  will 
teach  him  to  write  fast  and  well  at  the  same  time.  But,  however  badly 
he  may  write,  he  should  try  to  write  plain.  Plainness  is  of  more  conse- 
quence than  neatness  or  elegance.  He  should  be  very  careful  in  writing 
the  names  of  the  customers  of  the  bank.  If  he  write  them  illegibly,  there 
will  be  a  loss  of  time  in  making  them  out,  or  they  may  be  misunderstood, 
so  that  money  may  be  posted  to  the  wrong  account,  and  thereby  loss  arise 
to  the  bank.  On  this  account  also,  when  two  or  more  customers  have 
the  same  surname,  he  should  be  very  careful  to  write  the  Christian 
names  fully  and  distinctly. 

The  necessity  for  writing  quickly,  and  the  want  of  carefulness  at  first, 
are  the  causes  why  so  few  bankers'  clerks  comparatively  write  a  good 
hand.  But  they  should  remember  that  this  is  a  most  important  qualifica- 
tion, and  a  deficiency  in  this  respect  may  be  an  insuperable  bar  to  pro- 
motion. Without  this  attainment,  a  clerk  cannot  be  put  to  write  up  the 
customers'  books,  nor  to  make  out  the  country  accounts,  nor  to  write  the 
letters,  nor  to  fill  the  office  of  secretary.  "  You  ought  to  be  careful  to 
write  a  plain  hand.  You  impose  upon  your  correspondents  a  very  unne- 
cessary and  a  very  unpleasant  tax  if  you  require  them  to  go  over  your 
letters  two  or  three  times  in  order  to  decipher  your  writing.  A  business 
hand  is  equally  opposed  to  a  very  fine  hand.  A  letter  written  in  fine, 
elegant  writing,  adorned  with  a  variety  of  flourishes,  will  give  your  corre- 
spondent no  veiy  high  opinion  of  you  as  a  man  of  business."  (Lectures 
on  Ancient  Commerce,  by  J.  W.  Gilbart,  p.  239.) 

The  plan  of  writing-masters  who  advertise  to  teach  good  and  expedi- 
tious writing  in  a  few  lessons  is  as  follows:  —  The  pupil  rests  his  hand 
upon  the  paper  without  touching  it  with  his  little  finger.  All  the  motion 
is  then  made  from  the  wrist  Those  who  have  to  write  their  names 

151 


A   Treatite  on  Banking. 

nrany  tim«a  ta  mcoejsion,  such  ns  in  signing  bank-notes  or  in  accepting 
bills,  will  find  thai  on  thin  plan  they  cnn  i:«  i  through  their  work  in  much 
laaa  time  than  if  they  bend  their  fingers  with  every  stroke  of  the  pen. 

The  young  clerk  should  aim  be  taught  to  make  his  figure*  clear  and 
plain,  m>  that  a  2  cannot  be  mistaken  for  n  3,  nor  a  3  for  a  5.  lie  should 
also  take  care  that  the  tail  of  his  7  or  his  9  docs  not  run  into  the  line  be- 
low, and  thus  turn  a  0  into  a  6,  nnd  also  that  the  top  of  his  4  Hoes  not 
reach  ao  high  as  to  turn  a  0  in  the  line  above  it  into  a  9.  He  should  be 
careful,  too,  in  putting  his  figures  under  one  another,  so  that  the  units 
•hall  be  under  the  units,  the  tens  under  the  tens,  the  hundreds  under  the 
hundreds,  and  the  thousands  under  the  thousands.  Otherwise,  when  )< 
op  the  columns  together,  he  will  be  in  danger  of  making  a  u  wrong 


He  will  also  learn  to  use  both  hands  at  the  same  rime.  In  counting 
gold  or  stiver  coin,  he  will  count  with  two  hands  instead  of  one,  and  thus 
do  double  the,  work.  In  entering  a  number  of  cheques  or  bills,  while  he 
holds  the  pen  in  one  hand  he  will  hold  a  cheque  in  the  other,  and  then 
turn  over  the  cheques  as  quickly  as  he  enters  them.  He  will  always 
turn  them  over  one  on  the  back  of  the  other,  so  that  they  will  be  in  the 
same  order  after  he  has  entered  them  as  before,  and  when  they  are 
"called  over"  they  will  come  in  the  same  order  in  which  they  are  en- 
:••!••  i. 

He  must  also  learn  to  **  cast "  quickly  and  accurately.  The  two  main 
qualifications  in  this  operation  are  accuracy  and  quickness.  To  insure. 
accuracy,  a  clerk  will  cast  every  thing  twice  over.  The  first  time  he  will 
begin  at  the  bottom  of  the  column,  and  the  second  time  at  the  top.  If  he 
begin  both  times  at  the  bottom  of  the  column,  the  association  of  figures 
will  be  the  same ;  and  if  he  has  fallen  into  an  error  the  first  time,  he  will 
be  apt  to  fall  into  the  same  error  the  second  time.  But  if  he  changes  the 
order,  the  association  of  the  figures  will  be  different,  and  he  will  not  be 
likely  to  fall  into  the  same  error.  Quickness  can  be  acquired  only  by 
practice.  But  he  will  accelerate  his  speed  by  making  his  figures  plain, 
and  placing  them  strictly  in  a  line  under  one  another.  He  should  also 
learn  to  cast  without  speaking,  for  the  eye  and  the  head  will  go  faster 
than  the  lips. 

He  must  also  be  taught  to  "  call  over."  When  he  first  comes  into  the 
bank,  he  will  call  this  sum,  .£315  10*.  6rf.,  three  hundred  and  fift. -i n 
pomids  ten  shillings  and  six  pence,  but  he  will  soon  learn  that  more  than 
half  these  words  may  be  suppressed,  and  he  will  say,  three,  fifteen,  ten, 
six.  And  so  in  the  larger  amount,  ^4,785  13*.  4</.,  instead  of  saying, 
four  thotuand  seven  hundred  and  eighty-five  pounds  thirteen  shillings 
and  four  pence ,  he  will  call,  forty-seven,  eighty-five,  thirteen,  four.  By 
proceeding  in  this  way,  and  speaking  quickly  and  yet  distinctly,  a  column 
of  figures  may  be  called  over  and  checked  in  a  very  short  space  of  time. 
He  will,  however,  take  care  to  avoid  ambiguity.  Thus,  if  the  sum  be 
jEjO  &••  WM  he  will  not  say  forty,  five,  six,  as  that  would  mean  forty-five 
pounds  six  shillings ;  but  he  will  say,  in  this  case,  forty  pounds,  five,  and 
six.  In  cases  where  the  pounds  consist  of  five  figures,  the  first  two  de- 
noting the  thousands  are  expressed  separately  ;  thus  ,£25,347  8*.  6<i.  is 


Book-keeping. 

called  over,  twenty-five,  three  forty-seven,  eight,  six ;  and  six  figures,  say 
.£468,379  8s.  6d.,  are  called  over,  four  sixty -eight,  three  seventy-nine, 
eight,  six. 

He  will  also  be  taught  to  balance  ;  that  is,  to  find  the  difference  between 
two  sums  by  addition,  instead  of  subtraction.  Thus,  if  the  two  sums  be 
£  1,347  16*.  3d.  and  £  4,834  19s.  8d.  he  will  be  apt,  at  first,  to  put  one 
under  the  other  and  subtract,  in  this  way : 

£4,834  19     8 
1,347  16     3 


Difference,   ....  X  3,487    3    5 

But  he  must  be  taught  to  proceed  by  a  mental  process,  and  will  add  the 
difference  to  the  smaller  number,  thus : 

£1,347  16     3  —  £4,834  19     8 

Difference,  ....      3,487    3    5 


£4,834  19     8 

He  performs  this  operation  by  beginning  with  the  pence,  saying,  or  rather 
thinking,  "  three  and  five  make  eight,"  and  so  on.  And  thus  the  two 
sides  of  an  account  are  made  to  balance,  that  is,  both  sides  are  of  the 
same  amount. 

The  principle  of  balancing  pervades  the  whole  system  of  book-keeping. 
For  example,  we  know  that  if  to  the  amount  o£  cash  in  the  bank  last 
night  we  add  the  amount  received  to-day,  and  deduct  the  amount  paid  to- 
day, the  remainder  will  show  the  amount  on  hand  to-night ;  and  a  novice 
would  very  naturally  put  it  down  in  this  form : 

£ 

Cash  on  hand  last  night, 100,000 

Received  to-day, 60,000 

160,000 
Paid  to-day, 80,000 

Cash  on  hand  to-night, £  80,000 

But  an  accountant  would  arrange  these  four  items  in  such  a  way  as  to 
form  a  balance,  thus  : 


£ 

Cash  paid  away  to-day      .        .      80,000 
Cash  on  hand  to-night,  .        .          80,000 

£160,000 


£ 

Cash  on  hand  last  night,      .        .  100,000 
Casli  received  to-day,     .        .          60,000 

Balance,    .        .        .       £160,000 


In  keeping  the  Progressive  Ledger,  the  principle  of  balancing  is  of  con- 
stant occurrence.  The  ledger-keeper  brings  out  a  new  balance  every 
time  he  turns  to  an  account.  But  he  never  deducts,  —  always  adds.  And 
if  he  post  several  articles  at  the  same  time,  the  method  is  the  same,  thus : 

If  the  credit  balance  is  .        .        .        .        .        .        .    £1,214    3     7 

And  he  posts  the  following  sums  to  the  debit 
of  the  account,      .        .        .  ,'."         £141     2    4 

876 
49     3  11 
305     4     2 
£710     5     8 

153 


A  Trfatisf  on  Banking. 

Ho  will  add  up  theur  items,  and  mentally  add  a  sum  thnt  will  make  the 
whole  equal  to  £  1*214  3*.  7</.,  bringing  out  this  sum  as  a  new  halnnce. 
and  pirn-ing  it  under  the  former  one  as  ho  goes  on  Thus  |)(>  will  say, 
or  rather  think,  "4  and  6  an»  10,  and  11  are  'Jl.  :md  '  n<l  (hen- 

he  must  supply  the  figure)  8  am  31  =  7  and  cam-  VI  "  ;  mid  he  puts 
down  the  8  in  the  peace  division  of  tho  balance  column  ;  mid  goe«  on  in 
the  Mine  way  to  the  shilling*,  and  afterwards  to  the  pounds.  When  he 
has  placed  this  sum,  .£710  5*.  8rf.,  he  adds  up  the  whole,  including  this 
sum,  in  order  to  check  the  operation,  and  to  be  sure  that  he  is  ri^lit. 

He  will  then  acquire  a  knowledge  of  the  names  and  functions  of  the 
diflrrrnt  books,  and  of  the  term*  and  phraseology  used  in  bDok-hwping. 
The  mme  book  is  sometimes  called  by  different  names  in  different  bank*. 
and  different  terms  ore  employed  to  describe  the  same  operations.  Hut 
•very  clerk  should  use  the  language  of  the  office  in  which  he  is  placed. 
He  should  call  every  book  by  its  proper  name,  and  employ  the  phrases 
•Mull  are  and  by  others.  For  instance,  if  the  word  "  money  "  is  used 
to  denote  coin,  he  must  always  use  it  in  that  sense  ;  and  not  say 
*•  money  **  when  he  means  bank-notes. 

It  will  be  of  great  advantage  to  a  sensible  youngster,  if  one  of  the  se- 
nior clerks  should  take  the  trouble  to  give  him  a  general  notion  of  the  sys- 
tem of  book-keeping,  and  show  him  the  connection  that  exists  between  the 
books  that  he  keeps  and  the  other  books  of  the  office. 


IT.  We  shall  now  describe  the  system  of  Banking  Book-keeping,  as 
published  in  the  former  editions  of  this  work. 

Erery  person,  on  opening  an  account  with  a  London  banking-house, 
enters  his  name  in  a  book  called  the  Signature-Book,  and  this  book  is  re- 
ferred to  whenever  a  draft  is  presented  having  a  doubtful  signature.  The 
person  is  supplied  free  of  cost  with  a  book  of  printed  drafts,  and  a  cash- 
book,  called  in  some  houses  a  Pass-Book,  in  which  is  entered  an  account 
of  his  debts  and  credits,  as  often  as  he  thinks  proper  to  leave  it  for  that 
purpose. 

I»ndon  bankers  do  not  usually  give  receipts  for  money  paid  into  their 
hand*,  but  they  enter  the  amount  into  the  customer's  book.  A  person 
paying  money  on  account  of  a  country  book,  will  sometimes  require  a  re- 
ceipt, and  he  is  then  given  what  is  called  a  shop-receipt,  in  the  following 
form:  — 

London,  May  1,  1827. 

of  [d*  c*a*ry  bank]  Ae  turn  of  one  thousand  pound*. 
To  account  for  on  demand. 

For  Hope,  Rich,  fr  Co. 
A  Cathier. 

The  name  of  the  party  paying  the  money  is  not  inserted  in  the  receipt, 
as  that  would  require  a  stamp. 

The  payment  of  a  draft,  or  a  bill,  is  always  made  either  in  Bank  of 
fMfJmaA  notes,  or  sovereign*,  as  the  party  receiving  it  may  desire.  The 
London  bankers  never  re-issue  any  country  notes  or  bills  of  exchange,  that 
may  come  into  their  bands.  When  a  cheque  is  paid,  it  is  cancelled  bv 

154 


Book-keeping. 

drawing  the  pen  four  times,  in  different  directions,  across  the  name  of  the 
drawer.  In  Scotland  a  paid  note  or  cheque  is  said  to  be  "  retired"  It 
is  retired  or  withdrawn  from  circulation. 

Before  explaining  the  banking  system  of  book-keeping,  I  will  define  a 
few  terms  which  are  often  used  in  connection  with  the  subject.  By  the 
word  bill  is  always  meant  a  bill  of  exchange  not  yet  due.  The  word 
cash  denotes  the  various  items  included  in  a  credit  or  cash  entry,  and  may 
denote  due  bills,  cheques,  bank  notes,  country  notes,  or  coin.  The  terms 
cheque  and  draft  are  used  synonymously,  and  denote  an  order  on  a  banker, 
payable  on  demand.  The  word  draft  is  never  used  in  London  to  denote 
a  bill  of  exchange,  though  this  use  of  the  term  is  very  Common  in  the 
country.  Both  bills  and  drafts  are  often  called  articles,  and  if  they  are 
cash,  they  are  styled  cash  articles.  An  addressed  bill  is  a  bill  made  pay- 
able at  a  banking-house.  A  discounted  bill  is  usually  called  a  discount. 
By  money  is  always  meant  coin.  To  post  an  article  is  to  place  or  enter  it 
in  the  ledger.  One  book  is  said  to  mark  against  another  when  the  same 
entry  is  made  in  both  books.  One  book  is  checked  by  another  when  any 
error  in  one  book  would  be  detected  by  some  operation  in  another.  To 
check  a  book,  or  an  account,  is  to  examine  it,  and  prove  it  correct,  or 
make  it  so.  To  cast,  or  cast  up,  means  to  add  together.  The  balance  of 
an  account  is  the  difference  between  the  credit  and  the  debit  side.  An 
account  is  said  to  balance  when  the  credit  and  the  debit  side  are  of  the 
same  amount.  To  balance  an  account  is  to  enter  the  balance,  and  to  add 
up  both  sides,  and  then  to  bring  down  the  balance  as  a  new  amount. 
The  credit  side  of  an  account,  or  that  on  which  the  cash  received  is 
placed  to  the  credit  of  a  customer,  is  the  right-hand  side  as  you  face  the 
ledger ;  the  debit  side  is  the  left-hand  side.  In  London,  the  establish- 
ments of  bankers  are  usually  called  banking-houses,  not  banks.  A  per- 
son who  has  an  account  at  a  banking-house,  is  said  to  keep  a  banker. 

I  shall  now  describe  the  various  books  in  the  order  of  the  different  de- 
partments to  which  they  belong. 

I.  —  The  Cash  Department. 

The  principal  books  in  this  department  are  the  follpwing :  — 
1.  Two  WASTE-BOOKS.  —  One  is  called  the  Received-Waste-Book, 
and  the  other  the  Paid-Waste-Book.  In  the  former  is  entered  an  account 
of  all  the  cash  received,  and  in  the  latter  is  entered  an  account  of  all  the 
cheques  and  bills  paid.  The  Received- Waste-Book  is  ruled  with  a  double 
cash  column  on  the  right-hand  side  of  the  page.  In  making  an  entry 
into  this  book  you  will  proceed  as  follows  :  —  First,  enter  the  name  of  the 
party  who  lodges  the  money ;  then  enter  in  the  first  cash  column  the  par- 
ticulars of  which  the  credit  consists,  specifying  each  particular  in  the 
space  at  the  left-hand.  In  receiving  Bank  of  England  notes,  the  number 
and  date  of  each  note  must  be  mentioned ;  but  if  the  notes  are  numerous, 
make  them  up  in  a  parcel,  and  write  on  the  outside  the  total  amount, 
and  the  name  of  the  party  of  whom  they  were  received.  Call  this  parcel 
4  Sundries  "  in  your  entry.  These  parcels  of  sundries  will  be  marked, 

155 


A  Trtalue  on  Banking. 

•nd  Mfit  to  the  Bank  or  England  for  other  notes  on  the  following  day 
Cheques  on  your  own  bank  are  to  be  entered  by  the  name  of  the  drawer 
and  the  amount  Country  note*  aft  to  be  entered  \\\  the  name  of  the 
London  hanker  at  whose  house  they  arc  mod.-  payable.  Th.-s,.  are  <lis- 
itthcd  from  cheques  upon  bankers,  by  stating  short  the  number  and 
ihmiiiiiiiirm  n  of  the  note*;  thus,  A,  |.  All  gold  and  silver  an-  to  be 
called  money.  After  entering  all  the  particulars  of  a  credit,  add  them  io- 
gelher,  and  carry  out  the  amount  into  the  farther  cash  column.  At  the 
close  of  the  day  add  up  this  outer  column,  und  see  that  the  total  agrees 
with  the  amount  in  the  Day-Book. 

If  a  customer  brings  his  book  with  him  when  he  lodges  cosh,  the  cash- 
ier enters  the  credit,  and  returns  the  book  to  him,  unless  it  be  left  at  the 
bank  for  the  purpose  of  having  the  debit  side  also  written  up. 

In  receiving  money  for  a  deposit  receipt,  the  entry  is  made  in  the  same 
way  as  when  the  money  is  placed  to  a  current  account ;  but  the  words 
Deposit  Receipt,  or  the  letters  D.  R.,  arc  written  against  the  name  of  the 

the  Paid-Waste-Book  is  entered  an  account  of  all  the  hills  and 
by  the  bank.  This  book  is  ruled  on  each  page  with  a  cash 
on  the  right  hand,  and  another  on  the  left  hand,  leaving  a  space 
When  a  cheque  is  paid,  the  amount  is  placed  in  the  left-hand 
column,  then  the  name  of  the  drawer  in  the  open  space,  and  in  the 
right-hand  cash  column  arc  entered  the  particulars  of  the  payment.  Bank 
of  England  notes  are  entered  by  their  mimlxT.  It  is  not  necessary  to 
enter  tne  date,  as  that  can  be  found  if  in •<•»  --;iry  cither  in  the  Cash-Book 
of  the  preceding  evening,  or  in  the  Recerfed-Waste-Bbok,  or  the  Lists  of 
the  same  day.  When  a  deposit  receipt  is  paid,  the  same  order  is  ob- 
served, but  the  letters  D.  R.  are  added.  All  gold,  silver,  and  copper  are 
called  money.  At  the  close  of  the  day,  all  the  payments  are  added  to- 
gether, and  should  agree  with  the  amount  in  the  Day-Book. 

Each  cashier  has  a  Received- Waste-Book,  a  Paid- Waste- Book,  and  a 
MOMY-Book. 

2.  MONET-BOOK. —  This  is  a  small  book  ruled  with  a  cash  column  on 
the  right-hand  side  of  each  page,  und  it  contains  an  account  of  all  the 
CM*,  that  is,  the  gold,  silver,  and  copper,  in  the  bank.     Each  cashier 
will  enter  in  his  own  Money-Book  the  money  he  receives  and  pays  in  the 
course  of  the  day.     On  the  left-hand  page  of  the  book  he  will  copy  from 
bis  Paid- Waste-Book  the  various  sums  of  money  he  has  paid,  and  on  the 
right-hand  page  be  will  copy  from  his  Received-Waste-Book  the  various 
sums  of  money  he  has  received.    In  each  case  he  will  enter  against  the  re- 
flective sums  the  totals  in  which  they  are  included.     Thus,  if  in  paying 
a  cheque  of  £  175  2*.  6rf.,  he  pay  5-2-6  money,  he  will  enter  it  thus, 
-  £  175  2.  6.  £  5  -  2  -  6."    The  money  is  counted  up  at  night,  and  must 
•free  with  to  balance  of  the  Money-Book ;  and  this  balance  is  then  en- 
tored  in  the  Casb-Book. 

3.  CASB-BOOK.  —  In  this  book  is  entered  every  night  a  specification  of 
all  the  cash  in  the  bank.     The  items  will  consist  chiefly  of  Bank  of  Eng- 
iand  note*,  parcels  of  sundries,  country  notes,  cheques  on  other  banks, 
and  the  balance  of  the  money.    The  Bank  of  England  notes  arc  entered 

156 


Book-keeping. 

by  their. number,  date,  and  amount.  The  parcels  of  Bank  of  England 
notes  called  sundries  are  entered  by  the  word  "Sundries,"  then  the 
name  of  the  parties*  of  whom  they  were  received,  and  the  amounts ; 
country  notes  by  the  name  of  the  country  bank,  and  the  London  agent  at 
whose  house  they  are  made  payable ;  cheques  on  other  banks  by  the 
name  of  the  drawer  of  the  cheque,  the  name  of  the  banker,  and  the 
amount.  In  this  book  generally  the  cash  articles  are  more  fully  de- 
scribed than  in  the  Received- Waste-Book.  In  some  banking-houses  the 
Cash-Book  is  called  the  STOCK-BOOK,  and  in  others  the  MAKE-UP-BOOK. 

4.  DAY-BOOK.  —  This  book  is  ruled  with  a  double  cash  column  at  the  ^ 
right-hand  side  of  each  page.  The  accountant  enters  in  the  Day-Book 
an  account  of  all  cash  paid  and  received  during  the  day,  placing  each 
transaction  under  the  class  of  operations  or  accounts  to  which  it  belongs. 
On  the  left-hand  page  of  the  book  he  enters  the  cash  which  is  paid,  and 
on  the  right-hand  side  the  cash  which  is  received.  He  commences  by 
writing  the  day  of  the  week,  and  of  the  month  ;  then  on  the  left-hand  side 
he  writes  a  heading,  "  CURRENT  ACCOUNTS."  Under  this  head  he  enters 
all  the  cheques  paid,  copying  from  the  cheques  the  name  of  the  drawer, 
and  the  amount,  which  is  placed  in  the  first  cash  column.  The  sum  of 
all  the  cheques  is  brought  forward  into  the  second  cash  column.  The 
second  heading  is  "  DEPOSIT  RECEIPTS  "  ;  under  which  head  the  individ- 
ual receipts  paid  are  entered,  mentioning  the  number,  the  name  of  the  de- 
positor, and  the  sum  ;  and  bringing  out  the  total  amount,  as  before,  into 
the  second  cash  column. 

The  accountant  may,  if  he  please,  make  these  headings  in  the  morning, 
leaving  such  a  space  for  the  transactions  under  each  head  as  his  experi- 
ence may  show  him  to  be  necessary.  Thus,  he  may  keep  up  his  Day- ' 
Book  throughout  the  day,  and  merely  have  to  add  it  tip  and  balance  it 
when  the  bank  closes.  The  other  headings  may  be,  "  Bills  Discounted 
this  day,"  "  Interest  paid  on  Deposit  Receipts,"  "  Bank  Premises,"  "  In- 
cidental Expenses,"  "  Branch  Accounts,"  &c.,  answering  to  the  ac- 
counts in  the  General-Ledger. 

On  the  right-hand  page,  or  credit  side  of  the  Day-Book,  the  cash  re- 
ceived is  entered  under  corresponding  headings,  as  "  CURRENT  AC- 
COUNTS," "  DEPOSIT  RECEIPTS,"  "  BILLS  DISCOUNTED  PAID  THIS  DAY," 
&c.,  &c.  The  entries  under  the  heads  of  Current  Accounts,  and  Deposit 
Receipts,  are  copied  from  the  Received-Waste-Books :  the  entry  ex- 
presses only  the  name  and  the  amount. 

After  all  the  entries  have  been  made,  add  up  the  debit  and  the  credit 
sides.  To  the  credit  side,  add  the  amount  of  the  Cash-Book  on  the  pre- 
ceding evening ;  to  the  debit  side,  add  the  amount  of  the  Cash-Book  on 
the  same  evening ;  and  if  the  totals  agree,  the  "  bank  is  right,"  that  is, 
the  transactions  of  the  day  have  been  correctly  entered  ;  but  if  not,  then  _, 
the  bank  is  wrong,  and  the  error  must  be  discovered  by  "  marking  off" 
the  various  books. 

In  large  establishments  the  Day-Book  is  divided  into  two  books ;  the 

debit  side  forming  one  book,  and  the  credit  side  the  other  book.     One  is 

called  the  "  Paid  Day-Book,"  and  the  other,  the  "  Received  Day-Book." 

The  advantage  of  this  division  is,  that  two  persons  can  be  employed  at  the 

K  157 


A  TremtiM  on  Banking. 

Day-Book  at  the  same  time.  In  MUM  banks  the  Day-Book  has  three 
cash  columns,  the  thifA  being  used  for  transfer  entries.  These  arc  <  n- 
tries  in  which  no  cash  Is  actually  paid  or  received  by  the  bank  ;  but  an 
^Tfir****  b  transferred  from  one  account  to  another.  In  other  l>;mks,  all 
the  transfers  are  passed  through  the  Received- Waste-Book.  By  some 
London  houses  the  Day-Book  is  called  the  Cosh-Hook,  mid  its  two  divi- 
sions are  called  the  "  RECEIVED-CASH-BOOK  "  and  the  "PAID-CASH- 

BOOK.** 

5.  CctttKT-Accotmr-LtDOEi.  —  In  this  book  every  customer  has  a 
separate  account.     The  sums  received  to  his  credit  are  posted  from  the 
credit  side  of  the  Day-Book,  and  the  Ledger  folio  is  placed  in  the  Day- 
Book,  in  a  column  ruled  for  that  purpose.     The  debit  side  is  posted  from 
the  cheques  themselves,  and  the  Ledger  folio  placed  in  the  debit  side  of 
the  Day-Book  on  the  following  morning,  when  the  Day-Book  is  mark*  <1 
against  the  Ledger.    The  entry  of  a  cheque  in  the  Ledger  includes  the 
date  of  payment,  the  name  of  the  party  to  whom  it  is  payable,  and  the 
amount.    The  entry  of  a  credit  includes  the  date,  the  word  "  Cosh,"  and 
the  amount     When  the  cash  is  paid  into  the  bank  by  a  third  party,  it  is 
usual  to  enter  it  in  the  Ledger  as  "  Cash  per  A.  B."     When  a  credit 
arises  from  a  bill  lodged  for  collection  having  become  due,  the  name  of 
the  acceptor  is  substituted  for  the  word  cash. 

Some  banks  follow  what  is  called  the  progressive  plan  of  keeping  the 
Ledger.  By  this  plan  the  balance  is  brought  out  every  day,  and  thus  we 
see  the  progress  of  the  account.  In  the  ordinary  way,  each  page  of  the 
Ledger  is  divided  into  the  debit  and  the  credit  side,  and  each  side  has 
ruled  columns  for  the  date,  the  transaction,  and  the  amount.  But  in  the 
'progressive  Ledger  there  is  only  one  column  for  the  date  of  both  the 
credits  and  the  debits ;  one  space  for  a  description  of  the  transaction, 
whether  credit  or  debit ;  and  then  three  cash  columns.  The  first  column 
b  the  debit  column ;  the  second  is  the  credit  column  ;  and  the  third  is  the 
column  into  which  the  daily  balance  is  brought  out.  The  advantage  of 
this  plan  is,  that  you  can  see  at  once  what  sum  a  party  has  on  his  ac- 
count, without  the  delay  of  adding  up  the  debit  and  the  credit  columns. 
•  Most  banks  that  allow  interest  on  the  balance  of  the  current  accounts, 
keep  their  Leiger  on  the  progressive  plan ;  and,  besides  the  columns  I 
have  mentioned,  there  are,  on  the  right  side  of  the  balance  column,  a 
space  for  inserting  the  number  of  days  the  balance  may  remain  station- 
ary, and  two  interest  columns,  one  for  the  interest  of  a  credit  balance, 
and  the  other  for  the  interest  of  a  balance  overdrawn.  Most  banks  divide 
the  Current-Account-Ledger  into  two  or  more  parts,  and  the  names  of  the 
depositor*  are  placed  in  alphabetical  order,  from  the  beginning  of  the  first 
Ledger  to  the  end  of  the  lost 

6.  DEFOSIT-RECEIFT-BOOK.  —  Deposit  Receipts  are  receipts  granted 
for  sums  of  money  that  are  likely  to  remain  a  considerable  time,  and 
upon  which  interest  b  allowed.    These  receipts  are  distinguished  from 
current  accounts.    Cheques  cannot  be  drawn  against  any  sum  lodged  as 
a  deposit  receipt;  but  when  the  amount,  or  any  part  thereof,  is  with- 
drawn, the  receipt  itself  must  be  produced  at  the  bank,  and  delivered  up. 
The  Deposit- Rcccipt-Book  b  not  kept  ledger-wise ;  that  is,  each  person 


Book-keeping. 

has  not  a  separate  account  opened  for  him  in  a  distinct  part  of  the  book 
but  the  receipts  are  entered  chronologically,  according  to  the  date  of  the 
lodgment.  The  entry  includes  date  of  lodgment,  name  of  depositor,  pro- 
fession, residence,  amount,  interest  paid,  principal  and  interest.  The  last 
two  particulars  are,  of  course,  not  entered  until  the  receipt  is  cancelled. 
If  a  party  is  desirous  of  withdrawing  only  a  part  of  the  lodgment,  the 
whole  receipt  is  entered  as  paid,  and  a  new  receipt  made  out  for  the  sum 
which  remains. 

IT.  —  The  Bill  Department. 

Bills  are  divided  into  two  classes,  —  bills  deposited,  and  bills  discount- 
ed. Bills  deposited  are  bills  lodged  in  the  bank  for  collection,  to  be 
placed,  when  due,  to  the  credit  of  the  depositors.  Bills  discounted  are 
those  for  which  the  money  has  been  advanced,  and  which  are  therefore 
the  property  of  the  bank.  These  two  classes  of  bills  are  entered  in  sepa- 
rate sets  of  books ;  but,  as  the  books  are  kept  in  nearly  the  same  manner, 
I  shall  describe  them  together. 

1.  BILL-REGISTER.          )      These  books  are  kept,  as  the  word  regis- 
DISCOUNT-REGISTER.  )  ter  seems  to  imply,  chronologically,  the  bills 

being  entered  immediately  after  each  other,  in  the  order  in  which  they 
come  into  the  bank.  The  entry  includes  date  when  deposited  or  dis- 
counted, name  of  ingiver,  drawer,  accepter,  date,  term,  when  due, 
amount,  daily  amount.  The  bills  are  numbered,  and  the  register-number 
placed  upon  each  bill.  The  daily  amount  of  the  Discount-Register  is  en- 
tered in  the  debit  side  of  the  Day-Book,  under  the  head  "  Bills  Discounted 
this  day."  I  advise  that  the  headings  of  the  columns  of  this,  and  of  all 
the  other  books,  be  printed.  This  saves  time  and  prevents  mistakes. 

2.  BILL-LEDGER.  )      In  these  books  a  separate  account  is  opened 
DISCOUNT-LEDGER.  )  for  each  party ;  and  the  same  bills  which  have 

previously  been  entered  in  the  Registers  are  entered  in  these  Ledgers ; 
but  the  entry  is  much  shorter.  A  full  description  of  a  bill  is  given  in  the 
Register  only,  and  the  register-number  is  placed  as  a  reference  in  every 
book  in  which  the  bill  may  subsequently  be  entered.  The  entry  in  the 
Bill,  or  Discount  Ledger,  includes  date  when  deposited  or  discounted, 
name  of  accepter,  when  due,  and  amount.  In  some  banks  the  Discount- 
Ledger  is  kept  upon  the  progressive  plan,  which  is  very  useful,  as  it 
shows  at  once  to  what  amount  any  party  may  be  under  discount.  In  ad- 
dition to  this,  some  banks  place  in  the  Discount  Ledger  an  account  of  all 
bills  they  may  have  discounted,  to  which  the  party  is  an  accepter.  These 
bills  are  distinguished  from  those  which  have  been  discounted  for  the 
party  himself,  by  being  placed  on  the  left-hand  side  of  the  page.  This 
account  is  also  kept  on  the  progressive  plan.  A  Discount-Ledger  kept 
in  this  way  will  have  three  cash  columns  ruled  on  each  side  of  the  page : 
the  three  on  the  left-hand  will  be  headed  "  Where  Accepter,"  and  the 
three  on  the  right-hand  will  be  headed  "  Where  last  Indorser."  Between 
the  two  sets  of  columns  will  be  entered,  date  when  discounted,  register- 
number,  name  of  accepter  or  drawer,  when  due.  The  advantage  of  this 
plan  is,  that  on  turning  to  any  party's  account,  you  see  at  once  the  whole 

159 


A   TVeoliM  on  Banking. 

of  his  engagements  to  the  bank,  whether  arising  from  bills  that  liavo  been 
discounted  for  himsewr  bills  to  which  ho  is  only  the  aco*p:<  r. 

3.  BlLt-JocKKAL.  •PiscotJNT-JocRNAL. —  In  these  journals  the   bills 
are  entered  under  the  respective  days  on  which  they  fall  dm-.     For  this 
purpose,  the  day  of  the  week,  and  of  the  month,  is  placed  at  the  top  of 
eaehpage.    This  book  may  be  made  to  last  exactly  a  >•«•:,,-.  l>>  having 
headings  for  every  day,  from  the  1st  of  January  to  the  31st  «•!'  I  >>  <  <  mbcr, 
omitting  Sundays.     The  entry  includes  the  rcgister-numt>iT,  name  of  de- 
positor, or  for  whom  it  was  discounted,  accepter,  and  amount.     The  Dis- 
count-Journal has  three  cash  columns,  —  one  for  the  amount  of  each  bill, 
another  lor  the  bills  paid,  and  another  for  those  unpaid.     The  entry  is 
made  in  the  first  column,  on  the  day  the  bill  is  discounted ;  and  in  the 
other  two  on  the  day  the  bills  fall  due.     The  total  amount  of  bills  paid 
each  day  •  copied  from  the  Journal  into  the  received  side  of  the  Day- 
Book.    Those  unpaid  are  entered  into  the  transfer  column  of  the  Day- 
Book,  and  in  the  Past-Due-Bill-Book.    The  Bill-Journal  need  only  have 
one  cash  column,  as  most  banks  find  it  more  convenient  to  credit  their 
customers*  wOOOUB1*  with  all  the  bills  on  the  day  they  fall  due,  and  debit 
them  on  the  following  day  for  those  that  remain  unpaid.     Those  banks, 
however,  that  prefer  it,  may  have  separate  columns  in  the  Bill-Journal  for 
the  paid  and  the  unpaid  bills ;  and,  in  that  case,  the  unpaid  bills  are  re- 
turned on  the   following  day  to  the   depositor,  without   being   passed 
through  his  cash  account     This  is  sometimes  called  being  "entered 
short."     Some  banks  moke  one  book  serve  the  purpose  of  both  a  Bill- 
Journal  and  a  Discount-Journal ;  one  page  of  the  book  being  used  as  a 
Discount-Journal,  and  the  opposite  page  being  used  as  a  Bill-Journal. 

4.  THE  LISTS.  —  Each  banking-house  divides  London  into  a  certain 
number  of  districts,  according  to  the  extent  of  its  business.     Each  district 
is  called  a  walk,  and  usually  takes  its  name  from  the  direction  in  which  it 
lies ;  as  the  East  Walk,  the  West  Walk,  and  so  on.     To  each  walk  is 
assigned  a  book,  in  which  is  entered  every  day  a  list  of  the  bills  due  in 
the  walk ;  and  hence  the  book  is  called  a  List     Each  List  takes  its  name 
from  the  walk  to  which  it  belongs;  as  the  East  List,  the  \\«t  List,  &c. 
The  page  is  divided  into  four  columns,  the  first  and  third  of  which  are 
cash  columns.  •In  the  first  column  is  entered  the  amount  of  the  bill ;  in 
the  second,  the  name  of  the  accepter  and  the  register-number.     This  is 
done  the  day  before  the  bills  are  due.     After  the  teller  has  returned  from 
presenting  these  bills  for  payment  in  his  walk,  he  "  answers  "  each  bill ; 
that  w,  he  places  against  it  an  account  of  the  cosh  he  has  received  for  it, 
whether  cheques,  bank-notes,  or  money.     The  amount  is  entered  in  the 
third  column ;  and,  in  the  fourth,  the  description  of  each  kind  of  cash.    If 
the  bill  be  not  paid,  he  writes  L.  D.  for  "  left  direction,"  and  then  enters 
the  bill  in  the  "  Unpaid  List." 

In  the  Uinr  AID- LIST  are  entered  all  the  bills  not  paid  when  presented 
for  payment.  In  the  course  of  that  day  or  the  following,  these  bills  are 
44  answered,"  either  by  being  paid,  or  by  being  passed  to  the  debit  of  a 
customer's  account,  or  bv  being  transferred  to  the  Past-Due-Biil-Book. 
In  some  banks  the  Unpaid-List  is  called  the  "  TAKE-UP-BOOK." 

Cfceo,oei  upon  other  banks  are  entered  in  the  Lists  in  the  same  way 

160 


Book-keeping. 

as  bills,  unless  the  bank  sends  a  clerk  to  the  Clearing-house,  and  then  they 
are  entered  in  tke  "  Clearing-out-Book." 

From  this  description  it  will  be  seen  that  when  a  sum  is  received  to  the 
credit  of  a  current  account,  it  is  entered  in  the  Received-Waste-Book, 
copied  from  thence  into  the  Day-Book,  and  from  thence  into  the  Current- 
Account-Ledger.  When  a  cheque  is  paid  to  the  debit  of  a  current  ac- 
count it  is  entered  from  the  cheque  itself  into  the  Paid- Waste-Book,  the 
Day-Book,  and  the  Current-Account-Ledger. 

When  a  sum  is  received  for  a  deposit  receipt,  the  sum  is  entered  before 
the  receipt  is  granted  in  the  Deposit-Receipt-Book,  and  afterwards  in  the 
Receipt- Waste-Book  and  Day-Book.  When  a  deposit  receipt  is  paid,  it 
must  be  discharged  in  the  Deposit-Receipt-Book,  then  entered  in  the  Paid- 
Waste-Book,  and  afterwards  in  the  Day-Book. 

When  a  bill  is  discounted,  the  discount  is  calculated  by  the  accountant, 
who  at  the  same  time  observes  if  it  is  drawn  on  a  proper  stamp,  and  is  in 
every  respect  a  regular  and  negotiable  instrument.  If  the  party  for 
whom  it  is  discounted  have  a  current  account,  the  full  amount  of  the  bill 
is  placed  to  his  credit,  and  he  is  debited  for  the  interest.  If  he  have  no 
account,  he  is  paid  the  amount  minus  the  discount,  and  the  entry  is  made 
in  the  Paid-Waste-Book.  The  bills  discounted  each  day  are  entered  in- 
dividually in  the  Discount-Register,  and  the  total  amount  copied  into  the 
Day-Book.  The  bills  are  also  entered  individually  in  the  respective  ac- 
counts in  the  Discount-Ledger,  and  under  the  days  they  fall  due  in  the 
Discount-Journal.  When  these  bills  are  due,  the  amount  paid  each  day 
is  entered  in  the  Day-Book  in  the  cash  column,  and  the  amount  unpaid  is 
transferred  to  the  Past-Due-Bill  account,  and  is  entered  in  the  Day-Book 
in  the  transfer  column. 

W7hen  a  bill  is  deposited,  it  is  entered  in  the  Bill-Register,  the  Bill- 
Ledger,  and  the  Journal.  When  due,  it  is  placed  to  the  credit  of  the 
party  by  whom  it  was  lodged,  and  is  copied  from  the  Journal  into  the 
Day-Book,  thence  into  the  Current- Account-Ledger.  If  unpaid,  the  ac- 
count is  debited  on  the  following  day,  and  the  bill  is  returned  to  the  de- 
positor. 

At  the  commencement  of  each  day,  all  the  entries  made  the  preceding 
day  in  the  Day-Book  are  marked  against  the  respective  books  by  the  ac- 
countant, or  under  his  superintendence.  He  also  marks  the  Cash-Book, 
and  checks  the  adding  up.  The  Customers'  Books  are  then  compared 
with  the  Current- Account-Ledger.  The  debit  side  of  these  books  is  usu- 
ally written  up  the  preceding  evening  from  the  vouchers  by  the  tellers,  or 
out-door  clerks.  The  accountant  writes  up  the  credit  side,  and  sees  that 
both  sides  agree  with  the  Current-Account-Ledger. 

III.  —  The  Country  Department. 

In  this  department  is  managed  the  business  of  the  country  banks,  and 
of  those  customers  who  live  in  the  country.  When  the  letters  are  deliv- 
ered in  the  morning  by  the  postman,  one  clerk  takes  them  and  enters  in 
the  Waste-Book  the  cash  inclosed  in  the  letter  to  the  credit  of  the  respec- 
tive parties.  Another  clerk  takes  the  letters  and  enters  the  bills  in  tho 
N  161 


A   Trtttut  on  Banking. 


'.-Ledger,  and  the  Rill  Journal.  The  letters 
are  thftii  handedTto  a  ford  clerk,  wm  copies  off  into  a  bsjpk  all  the  pay- 
sMsUt,  which  are  to  be  made  immediately  in  cash.  This  book  is  usually 
called  the  Draft-IVjok,  as  th«  party  receiving  tho  money  signs  a  draft  for 
the  amount,  which  m  as  good  as  signing  a  receipt  If  the  payment  is  to 
'e  to  a  banker,  he  imieifgf  notice  in  a  printed  form,  called  a  momo- 
i ;  but  if  the  payment  is  ordered  to  be  made  to  a  private  individual, 
I  call  for  it.  and  claim  the  exact  amount.  The  following  is  the 
sent  to  a  banking-house.  The  right-hand  side  is  filled  up  l>\  the 
)  to  whom  it  is  sent,  and  the  memorandum  is  paid  through  the 


1,1834.     O$O  London,  December  \,  1834. 

Ifasrs.  Asa**  Ck.  £3o-3  Metm  II0^  Ric^^C°- 

•/  |<fc  «a**y  bank],  per  \^r£^      Pay  E.  F.,  £•?.,  or  bearer,  the  mm 
,  Utf*,  JfeA,  f  Ck,  OH  MM  of  CSx2  "/" »«  hundred  pound*,  on  account  of 
x  m  S^yR  [U*  country  bank}. 

oX*^>  for  Alettr*.  Steady  fr  Co. 

Omtm~*of[E.F.,E*i.]     OgO     £  100.  4  Or*. 

A  fourth  clerk  now  takes  the  letters,  and  enters  all  the  advices  (that  is, 
hills  adritfd  to  be  paid  when  due)  in  the  Advice-Book  and  in  the  Advice- 
Journal.  The  corresponding  clerk  who  answers  the  letters  usually  man- 
ages the  stock  department  Hence  he  observes  the  orders  to  purchase  or 
sell  stock,  to  procure  powers  of  attorney,  and  other  business  of  that  kind. 
When  writing  a  reply  to  the  letters  received,  he  notices  if  all  the  items  in 
the  letters  are  marked  by  the  proper  clerks.  If  any  thing  is  wrong,  he  is 
informed  of  it.  Bankers1  letters  are  usually  short  and  plain,  comprising 
only  two  or  throe  lines.  The  following  example  includes  all  the  ordinary 

Mean*.  HOPE,  RICH,  &  Co.,  Banker*,  London. 

Country  To*m,  May  1,  1827. 

Gcvrunw, —  Inclosed  we  remit  you  sixteen  bills,  value  X  1,750,  and  cash  £250. 
•niiag  together  4  SjOOO  to  oar  credit ;  and  we  subjoin  a  list  of  payments  and  advices, 
to  be  Made  to  onrdebit.  We  will  thank  you  to  purchase  £  10,000  new  Fours,  in  the 
MBM«fjBMS  Wealthy,  gentleman,  of  Stately  House,  near  Prince  Town;  and  for- 
ward w  a  power  of  attorney  for  Hie,  and  dividends  of  £  200  Consols,  now  standing  in 
*•  BMM  of  SMSA  Thrifty,  spinster,  of  this  place.  Please  inform  us  of  the  respccta- 
Ulity  of  Maws.  John  Careful  &  Co.,  of  South  wark,  —  they  bonk  at  Messrs.  Steady  & 
Co,  Lossbari  Street  The  bill  you  sent  us  to  present  here  for  payment  has  been  paid, 
and  w«  credit  jroa  £50,  the  amount.  We  herewith  send  you  the  M^nature  of  our  rchi- 
tfv»V  Mr-  Joha  K**a,  who  is  going  to  London,  and  whose  drafts  to  the  extent  of 
X»VX)0  we  wbh  yoa  to  boBor  to  our  debit.  On  Mr.  Keen's  return,  which  will  be  in 
•hosrt  a  week  or  tea  days,  he  will  bring  with  him  oar  paid  notes. 

We  are,  Gentlemi  n. 

Your  obedient  Servants, 

KEEN,  BUST,  &  Co. 

[•EPLT.J 

Mean.  KIEV,  BUST,  &  Co.,  Banter*,  Country  Town. 

I*ndon,  May  2,  1 827. 

Onrrumw,  —  We  hare  received  yonr  favor  of  yesterday's  date,  inclosing  «un- 
*ies,  valac  £  J.OOO,  which  we  have  patted  to  yoor  credit,  and  note  your  lists  of  pay- 


Book-keeping. 

ments  and  advices.  We  also  credit  you  £  1,476  16s.  Gd.,  per  Messrs.  Good  &  Co.,  on 
account  of  John  Green.  We  have  inquired  of  Messrs.  Steady  &  Co.,  as  to  the  respec- 
tability of  Messrs.  John  Careful  &  Co.,  and  are  informed  they  are  highly  respectable. 
We  now  inclose  a  stock  receipt  for  Mr.  James  Wealthy's  £  10,000  new  Fours, 
£10,012  10s.  to  your  debit;  and  also  Susan  Thrifty's  power  of  attorney,  for  which  we 
debit  you  £  I  Is.  6d. ;  also  a  dishonored  bill  on  Badluck,  noted  £  100  Is.  6e?.,  to  your 
debit ;  and  your  weekly  cash  account  and  monthly  account  current,  which  we  trust  will 
be  found  correct.  We  debit  you  £  50  for  the  bill  you  had  the  goodness  to  present  for 
us ;  and  we  now  inclose  another  on  White,  £  120,  which  we  will  thank  you  to  get  ac- 
cepted and  return.  We  have  opened  a  credit  in  favor  of  Mr.  John  Keen  for  £  3,000, 
and  will  forward  your  paid  notes  by  him  as  requested. 

We  are,  Gentlemen, 

Your  obedient  servants, 

HOPE,  RICH,  &  Co. 

Those  London  bankers  who  act  as  agents  to  banks,  or  to  other  parties 
in  the  country,  will  have  occasion  for  the  following  books.  The  first 
seven  are  kept  in  the  same  manner  as  the  corresponding  books  in  the 
Town  Department.  All  the  entries  in  the  Country  Ledger,  as  well  as 
those  in  the  Town  Ledger,  must  first  pass  through  the  Waste  and  Day- 
Books.  The  credit  side  of  the  Ledger  is  posted  from  the  Bill-Journal 
and  the  Day-Book.  The  debit  side  is  posted  from  the  vouchers  them- 
selves, and,  like  the  debit  side  of  the  Town-Ledger,  will  mark  against  the 
Paid-Day-Book  and  the  "  Clearing-in-Book." 

1.  A  Country-Ledger. 

2.  Country-Bill-Register. 

3.  Country-Discount-Register. 

4.  Country-Bill-Ledger. 

5.  Country-Discount-Ledger. 

6.  Country-Bill-Journal. 

7.  Country-Discount-Journal. 

8.  Advice-Book.  —  In  this  book  are  entered  an  account  of  bills  advised 
to  be  paid  on  account  of  the  Country  Banks.     This  book  is  kept  ledger- 
wise,  each  bank  having  a  separate  account. 

9.  Advice-Journal. — This  book  is  similar  to  the  Bill-Journal,  and  it 
contains  the  advices  under  the  heading  of  the  days  on  which  they  are  to 
be  paid. 

10.  Credit-Book.  —  This  book  contains  an  account  of  the  credit  grant- 
ed by  a  country  bank  in  favor  of  any  party.     Each  party  has  an  account 
open  for  him  in  this  book,  and  the  amount  of  his  credit  is  placed  to  this 
account.     He  is  debited  for  such  cheques  as  he  may  draw,  and  the 
cheques  are  then  passed  to  the  debit  of  the  country  bank  in  the  Country- 
Ledger. 

11.  Acceptance-Book.  —  In  this  book  are  entered  those  bills  which 
have  been  received  from  the  country,  and  which  require  the  acceptance 
of  the  party  on  whom  they  are  drawn.     The  entry  includes  the  date 
when  taken  out,  the  name  and  residence  of  the  drawee,  the  register- 
number,  and  the  amount.     There  are  also  two  vacant  columns,  in  one  of 
which  the  clerk  who  takes  the  bill  for  acceptance  enters  his  initials  when 
he  brings  it  back ;  in  the  second  column  are  entered  the  initials  of  an- 
other clerk  to  whom  the  bills  when  "  brought  in  from  acceptance  "  are 
delivered.     Though  this  book  is  connected  with  the  country  department, 
it  is  usually  kept  in  the  town  office. 

163 


A  TreatiM  on  Banking. 

19.  Siock.Rook.  —  London  bunkers  have  usually  powers  of  attorney 
from  their  eorreapondcnts  in  tho  country,  authorizing  them  t<>  receive  divi- 
dends on  the  p«>\«  mm.  nt  funds.  All  these  arc  entered  in  a  book  called 
th«-  Stock-Hook.  The  book  is  divided  into  several  parts  for  the  different 
kind*  of  ntuck,  as  3  per  Cent  Consols,  3  per  Cent.  Reduced,  &c.,  ozc. 
In  each  division  are  entered  the  powers  of  attorney  held  l>\  the  hunk. 
The  entry  includes  date  of  the  powers,  names  <>t'the  attorney,  n.mies  of 
the  holders  of  the  stock,  and  lite  amount.  These  entries  should  be  made 
•  tolerable  distance  apart  from  each  other,  to  leave  room  to  notice  any 
alteration  that  may  take  place  in  the  amount  of  the  stock  either  by  sales 
or  new  purchases. 

Every  country  bank  keeps  an  account  with  a  London  bank.  The 
country  banker  receives  from  London  a  weekly  statement  of  his  cash  ac- 
counts, and  a  monthly  account  current  The  cash  account  is  a  copy  of 
the  London  banker's  ledger.  But  as  the  London  banker  does  not  con- 
sider as  cash  any  thing  which  may  not  be  immediately  turned  into  Bank 
of  England  notes,  the  cash  account  does  not  exhibit  a  statement  of  the 
umduf  bills  which  the  country  banker  may  have  remitted,  nor  of  the  bills 
which  he  may  have  advised  to  be  paid.  By  means  of  a  monthly  account 
current  he  has  a  full  view  of  all  these  transactions.  On  the  credit  side  of 
the  account  current  is  entered  the  total  amount  of  each  remittance, 
whether  it  consists  of  bills  or  cash.  These  are  followed  by  entries  of 
M  extra  "  sums  of  cash  that  have  been  lodged  to  the  credit  of  the  country 
bank  by  parties  resident  in  London.  On  the  debit  side  of  the  account 
current  is  placed  the  total  amount  of  the  "advices";  that  is,  of  bills  ad- 
rtsed  to  be  paid,  and  also  any  "extra"  payments  of  "drafts"  to  per- 
sons  in  London.  Then  the  account  is  balanced,  and  we  have  an  easy 
check  by  which  any  error  that  may  have  crept  into  either  the  cash  ac- 
count or  the  account  current  is  detected.  For  if  both  accounts  be  correct, 
the  amount  of  advices  not  yet  due,  added  to  the  balance  of  the  account 
current,  will  be  equal  to  the  amount  of  bills  not  due,  added  to  the  balance 
of  the  cash  account. 

IV.  —  The  Note  Department. 

Those  banks  that  issue  notes,  will  have  occasion  for 

A  NOTE-REGISTEH.  —  In  which  the  denomination,  number,  and  date 
of  the  notes  will  be  entered  when  prepared  for  circulation.  The  total 
•mount  of  notes,  as  soon  as  they  are  received  from  the  stamp-office,  or 
at  least  as  soon  as  they  are  signed  by  the  banker  or  manager,  are  entered 
to  the  credit  of  "  note  account,"  and  arc  afterwards  taken  down  daily  as 
part  of  the  "cash"  in  the  possession  of  the  bank.  If  the  notes  on  hand  be 
deducted  from  the  balance  of  the  note  account,  the  remainder  will  show 
the  amount  of  notes  in  circulation.  Another  way  is  to  open  an  account 
for  **  Notes  in  Circulation,"  and  to  credit  this  account  for  the  notes  on 
hand  ercry  morning,  and  debit  it  for  the  notes  on  hand  every  ni^ht :  the 
balance  will  show  the  amount  of  notes  in  circulation.  Then'  should  also 
be  a  book  for  the  "  Register  of  Cancelled  Notes,"  in  order  to  keep  an  ac- 
count of  those  notes  which,  having  become  unfit  for  further  use,  have 

164 


Book-keeping, 

been  cancelled  and  destroyed.     The  notes  when  cancelled  are  placed  to 
the  debit  of  the  "  Note  Account." 

V.  —  The  Branch  Department. 

In  those  banks  that  have  branches,  the  head  office  keeps  an  account 
with  each  branch  in  the  same  way  as  a  London  banker  keeps  an  account 
with  a  country  bank.  There  is  usually  an  additional  "  Bill-Register  "  for 
the  bills  payable  at  branches.  Each  branch  has  also  two  Bill-Registers, 
for  the  bills  payable  at  head-office,  and  the  bills  payable  at  branches,  and 
frequently  another  for  the  bills  sent  for  collection  to  agents,  where  the 
branch  does  not  remit  all  its  bills  to  the  head  office,  but  direct  to  agents  in 
other  places  in  order  to  be  collected.  Every  country  banker  has  also 
similar  Bill-Registers  for  "  Bills  payable  in  London,"  "  Bills  payable  at 
Bristol,  Manchester,  &c.,"  as  the  case  may  be  ;  and  of  course  correspond- 
ing accounts  must  be  opened  in  the  General-Ledger. 

There  must  also  be  a  book  for  entering  "  Branch  Notes  paid."  These 
notes  may  either  be  placed  as  the  debit  of  the  branch  on  the  day  they  are 
oaid,  or  they  may  be  carried  daily  or  weekly  to  the  debit  of  an  account 
to  be  called  "  Branch  Note  Account,"  and  may  be  placed  to  the  debit  of 
the  branch  on  the  day  they  are  sent  home. 

VI.  —  The  General-Ledger. 

Into  this  Ledger,  under  the  various  accounts,  will  be  entered  the  totals 
of  the  corresponding  headings  or  accounts  specified  in  the  Day-Book. 
The  accounts  in  this  Ledger  denote  the  various  classes  of  operations,  and 
the  balances  show  at  all  times  the  exact  state  of  the  bank.  Every  Satur- 
day night  the  totals  and  balances  of  these  accounts  should  be  taken  off  on 
<i  balance-sheet.  "'•When  all  the  debits  are  added  together,  and  all  the 
credits  are  added  together,  the  two  sides  will  agree  ;  that  is,  they  will  be 
of  the  same  amount.  These  balance-sheets  may  be  printed  and  bound 
together  in  a  book,  to  be  called  the  "  General-Balance-Book."  I  cannot 
better  explain  the  General-Ledger  than  by  giving  the  form  of  the  weekly 
balance-sheet,  with  the  names  of  those  accounts  which  most  banks  have 
occasion  to  introduce.  I  have  distributed  these  accounts  into  five  classes : 
—  1.  Lodgments;  2.  Investments;  3.  Expenditure;  4.  Cash  Account, 
with  Branches ;  and  5.  Proprietors'  Accounts.  Each  bank,  however, 
will  open  such  accounts  as  are  adapted  to  its  transactions.  Whatever 
books  the  business  may  render  necessary  will  require  to  have  correspond- 
ing accounts.  The  General-Ledger  contains  the  summaries  of  all  the 
other  books.  Thus,  the  account  called  "  Current- Accounts  "  contains 
the  summary  of  the  Current- Account-Ledger.  The  account  called  "  De- 
posit-Receipts" is  a  summary  of  the  Deposit-Receipt-Book.  The  ac- 
count called  "  Bills  discounted  "  is  a  summary  of  the  Discount- Register 
and  the  Discount-Journal.  In  this  way  every  book  in  the  office  has  a  cor- 
responding summary  in  the  General-Ledger.  Hence,  this  book  is  a  check 
»jpon  all  the  other  books ;  and  by  means  of  these  summaries,  the  partners 
•>r  directors  of  a  bank  can  see  at  once  the  actual  state  of  their  affairs,  and 
^an  trace  the  progress  or  decline  of  different  branches  of  their  business. 

165 


A  TVttliw  on  Bonking. 


THE 

RANK1\< 

COMPANY. 

Amowt»  mtd  Baltmm  if  At  GMBRAL  LEIXJRR 

on 

*—  **. 

B-^Dr 

TiUMofAccottoU. 

g 

n*)*nf«t    Cr 

Amount*.  Cr. 

I.  LODOMKWTS. 

London  Cnrrcnt  Accounts. 

trv  ditto. 

Bill*  Deposited  (in  Ixmdon) 
Ditto  (from  the  Country). 
-  in  Circulation. 
Credits  on  Agent*. 

II      INVESTMENTS. 

i  )i«-onntcfl  (in  Tx>ndon) 
Ditto  (from  the  (  'ouniry). 
l'.i>!  l)u.'  Hills.     ' 
GoviTniiu-nt  Stock. 
East  Iinlia  Bunds. 
KM-IU-.JIHT  Hilln. 
Loans  to  Customers. 
Ditto  to  lirokcrs. 
Interest  At  i  ount. 

III.  EXPENDITURE. 

Bank  Premises. 

K.-nt. 
Taxes. 
Salaries. 

Stationery. 
Incii|«-nt:il  Kxpcnso*. 
Law  Expenses. 

IV.  CASH  ACCOCKT,  WITH 
BRANCHES. 

Hrnncli  A. 
Itruni-h  H. 
Bran 
Branch  D. 

V.  PKOPBIXTOBB'ACCOCNTB. 

Paid-up  Capital. 
Preliminary  KxpeBMt, 
Divul.  nil  Account. 
Unclaimed  Dividends. 
Surplus  Fund. 
Profit  and  Loss. 
Fund  for  Bad  Debts. 

GoMtl  Account  of  Cash. 





— 

- 



- 

- 

Book-keeping. 

It  will  be  observed,  that  the  accounts  introduced  into  the  preceding 
balance-sheet  are  such  as  would  be  necessary  to  a  London  bank  that  had 
country  agencies  and  branches,  and  issued  notes.  No  such  bank  exists. 
But  I  have  introduced  all  these  accounts  that  each  bank  may  take  those 
which  are  adapted  to  its  transactions.  It  will  also  be  observed,  that  I  have 
kept  the  country  business  distinct  from  the  town  business ;  so  that  the 
comparative  extent  of  each  may  be  immediately  perceived.  I  have  intro- 
duced cash  columns  for  the  amounts  as  well  as  the  balances ;  for  although 
the  balances  are  sufficient  to  show  the  actual  state  of  the  bank,  yet  the 
amounts  are  necessary  to  show  the  business  that  has  been  done  since  the 
previous  half-yearly  balance. 

1.  The  first  class  of  accounts,  under  the  head  of  LODGMENTS,  are  all 
credit  accounts ;  that  is,  the  balance  is  on  the  credit  side. 

CURRENT  ACCOUNTS  are  those  which  are  usually  kept  by  the  London 
bankers,  and  are  called  by  the  Bank  of  England  "  Drawing  Accounts." 
DEPOSIT  RECEIPTS  are  more  permanent  lodgments,  upon  which  the  joint- 
stock  banks  allow  interest.  The  account  "  BILLS  DEPOSITED,"  not  be- 
ing a  cash  account,  might  be  omitted  without  deranging  the  balance  of  the 
General-Ledger.  If  introduced,  its  balance  must  be  placed  on  both  sides 
the  balance-sheet,  or  the  totals  will  not  agree.  The  General-Ledger  is  no 
check  upon  the  accuracy  of  this  account.  It  should  therefore  be  checked 
periodically,  by  taking  off  the  daily  amounts  current  from  the  Journal, 
and  comparing  the  total  with  the  balance  of  "  Bills  Deposited  in  the  Gen- 
eral-Ledger." 

Some  banks  distribute  their  bills  deposited  into  several  accounts,  as 
"  Bills  Deposited  by  Agents,"  "  Bills  Deposited  by  Branches,"  "  Bills 
Deposited  by  Private  Parties,"  &c.,  &c.  On  the  debit  side  of  the  General- 
Ledger  these  "  bills  deposited "  are  mixed  with  the  bills  discounted  in 
different  accounts,  according  to  the  places  where  the  bills  are  payable,  as 
"  London  Bills,"  "  Manchester  Bills,"  "  Branch  Bills,"  &c.  Those  de- 
posited bills  that  are  payable  in  the  place  where  the  bank  is  established, 
are  usually  distinguished  from  the  discounted  bills ;  one  account  being 
called  "  Local  Bills  Discounted,"  and  the  other,  "  Local  Bills  Deposited." 

NOTES  IN  CIRCULATION.  —  When  the  notes  are  made  payable  at  any 
other  place  beside  the  place  of  issue,  this  account  will  only  show  the 
"  apparent  circulation,"  as  the  notes  that  have  been  paid  by  the  agents,  or 
at  the  other  branches  of  the  bank,  cannot  be  brought  into  the  account 
until  they  have  been  returned  for  re-issue.  I  have  classed  this  account 
under  the  head  of  Lodgments,  because  it  denotes  a  portion  of  the  debt  due 
from  the  bank  to  the  public. 

CREDITS  ON  AGENTS.  —  When  a  bank  grants  a  Bill,  or  Letter  of  Credit, 
upon  their  agents,  the  money  received  is  placed  to  the  credit  of  this  ac- 
count. When  the  bill  is  due,  or  the  credit  paid,  it  is  placed  to  the  debit 
of  this  account,  and  to  the  credit  of  the  agent's  cash  account.  The  busi- 
ness of  some  banks  requires  a  subdivision  of  their  credits,  as  "  Credits  on 
London  Agents,"  "  Credits  on  Bristol  Agents,"  &c.  Some  banks  have 
also  an  account  for  "Credits  on  Branches";  but  where  all  the  credits 
granted  are  payable  on  demand,  they  are  usually  placed  at  once  to  the 
-credit  of  the  cash  account  of  the  branch  on  which  they  are  drawn. 

107 


A  TremliM  on  Banking. 

ImrBSTMBim. — The  accounts  I*  to  this  class  am  all  debit 

;  that  b,  the  balance  (if  any)  is  always  <>»  il  ••  d«  l>it  side. 

I    .    •         •  -.;,.-•.••  r.    -     I  I.'.]   that  :i!i   ll..'   h:Ms    lire    pay- 

able  in  London, as  the  London  bankers  <!<>  not  discount  bills  pa\  ;ihV  else- 
»hsm.    The  division  into  two  mvo  ,n-s  i-  merely  t<>  show  -h.  compai 
eatent  of  the  town  and  the  country  business.     'II-*1  first  account  m< 
the  bilb  discounted  for  parties  resident  in  London,  and  tin    -•<•«. mi  in- 
otodes  the  bilb  dbcountcd  for  pnrtics  resident  in  tin-  country.     \\ !,- - 
bUb  are  payable  at  different  places,  they  an-  n;f« -rn-d,  as  1  hav«- a' 

to  different  accounts,  as   "  London   Hills,"1    "  Hristol    Hills/' 
Hills,"  Ac.      It  is  not   usual,  in  these  CBSes,  to  distinguish 
the  bilb  discounted  and  the  bills  deposited,  but  to  place  tin  -in 
on  the  same  account ;  for  instance,  tin1  account  "  London  Hills  " 
all   bilb  payable  in  London,  whether  discounted  or  dc. 
If  thought  proper,  however,  they  may  be  easily  divided   into 
i  "London  Bills  Discounted,"  and  "London  Bills 


rA»T»Dci-BlLLS.  —  When  a  discounted  bill  is  not  paid,  it  is  transferred 
to  the  debit  of  this  account.     "  Bills  deposited  "  never  pass  into  this  ac- 
t; but  if  unpaid,  are  returned  to  the  parties  by  whom  they  \\ere  de- 


When  the  bank  purchases  "  Government  Stock,"  "  Exchequer  Bills," 
"  India  Bonds,''  \c.,  the  purchase-money  is  passed  to  the  dehit  of  an  ac- 
count  raised  for  the  purpose.  Upon  re-sale,  the  account  is  credited  for 
the  money  received,  and  the  difference  between  the  money  invested  and 
the  money  received  is  passed,  at  the  end  of  the  year,  to  the  debit  or  the 
credit  of  profit  and  loss  account. 

LOANS.  —  This  account  is  debited  for  the  amount  of  any  loan  granted 
to  a  customer,  or  to  any  other  party,  on  security.  N\  hen  a  customer 
wants  a  temporary  advance,  the  usual  way,  in  London  hanks,  is,  not  to 
let  him  overdraw  his  account,  but  to  place  to  his  credit  the  sum  he  may 
require,  and  debit  the  loan  account.  The  interest  is  charped  upon  the  full 
amount  of  the  loan.  When  the  loan  is  repaid,  this  account  is  credited. 

3.  EXPENDITURE.  —  The  accounts  under  this  head  require  little  expla- 
nation. "Bank  Premises"  is  debited  for  the  expense  of  altering,  paint- 
ing, Ace.,  the  buildings  and  offices  connected  with  the  kink.  The  other 
accounts  are  debited  for  the  different  classes  of  expenditure  as  they  occur. 
At  the  end  of  the  year  these  accounts  are  credited,  and  the  several 
amounts  are  placed  to  the  dehit  of  "  profit  mid  loss  account." 

SB  ACCOUNT  WITH  BRANCHES.  —  The  title  of  this  class  of  ac- 
counts it  sufficiently  explanatory.  I  will  only  observe,  that  in  some  hanks 
each  branch  keeps  a  distinct  cash  account  with  every  other  branch,  and 
with  the  several  agents  of  the  bank  with  whom  it  may  have  transactions. 
Bat,  in  other  banks,  each  branch  passes  all  its  transactions  through  its 
*  ""  the  head  office.  It  debits  the  head  office  for  \\h 


k  may  remit  to  either  a  branch  or  an  agent,  and  it  credits  the  head  office 
for  whatever  sums  it  may  receive  from  a  branch  or  an  ;  . 

6.  PBortiETORs'  ACCOUNTS.  —  This  class  of  accounts  refers  to  the  in 
ternal  operations  of  the  bank. 

MB 


Book-keeping. 

PAID-UP  CAPITAL.  —  If  the  capital  has  been  paid  up  at  different  times, 
this  account  may  be  divided  into  "  First  Instalment,"  "  Second  Instal- 
ment," "  Third  Instalment,"  &c. 

PRELIMINARY  EXPENSES.  —  Several  joint-stock  banks  have  passed  to 
an  account  of  this  sort  the  expense  of  forming  the  company ;  and  these 
expenses  are  discharged  out  of  the  profits,  by  equal  portions,  in  the  course 
of  five  or  ten  years.  This  is  considered  a  more  equitable  mode  than  to 
pay  these  expenses  out  of  the  profits  of  the  first  two  or  three  years. 

SURPLUS  FUND.  —  When  the  whole  of  the  annual  profits  are  not  di- 
vided among  the  partners  or  proprietors,  the  surplus  is  transferred  to  an  ac- 
count, called  "  Surplus  Fund,"  where  it  remains  for  the  purpose  of  being 
applied  to  meet  any  losses  or  contingencies  that  may  occur  in  after  years. 

PROFIT  AND  Loss.  —  To  the  credit  of  this  account  is  placed  all  interest 
and  commission  received ;  and  to  the  debit  is  placed  all  interest  paid. 
These  entries  are  made  at  the  time  the  transactions  occur.  At  the  end 
of  the  year  this  account  is  credited  for  all  the  profits  that  have  been  made 
during  the  year  upon  Government  Stock,  Exchequer  Bills,  &c.,  and  is 
debited  with  the  several  items  of  expenditure.  The  Profit  and  Loss  Ac- 
count may  be  subdivided  into  several  accounts,  as  "  Interest  Received  on 
Bills  Discounted,"  "  Commissions  Received,"  "Interest  paid  on  Deposit 
Receipts,"  "  Charge  for  Agency,"  &c.,  &c.  When  it  is  not  thus  divided, 
a  complete  abstract  of  the  account  should  be  made  out  at  the  end  of  the 
year. 

GENERAL  ACCOUNT  OF  CASH.  — The  introduction  of  this  account  makes 
the  General-Ledger  a  perfect  check  upon  the  other  books.  For  by  this 
means  the  total  of  all  the  balances  of  the  debit  side  of  the  General- 
Ledger  are  equal  to  the  total  of  all  the  balances  of  the  credit  side.  To 
the  debit  of  this  account  is  passed,  every  day,  the  total  amount  of  the 
credit  side  of  the  Day-Book  ;  and  the  account  is  credited  for  the  amount 
of  the  debit  side  of  the  Day-Book ;  consequently,  the  balance  of  this  ac- 
count will  be  always  on  the  debit  side,  and  will  be  equal  to  the  differencfe 
between  the  sum  of  all  the  other  debit  balances,  and  the  sum  of  the 
credit  balances ;  that  is,  it  will  show  the  amount  of  cash  in  the  bank. 
The  General-Ledger  is  always  kept  on  the  progressive  plan  (see  page 
158),  so  that  the  balance  of  any  account  can  be  seen  upon  inspection  ; 
and  its  progress  from  any  past  period  can  be  distinctly  and  readily 
traced. 

VII.  —  Periodical  Balances. 

DAILY  BALANCE.  —  It  is  well  known  that  bankers  try  their  balance  at 
the  close  of  their  business  every  night,  with  a  view  of  correcting  any  er- 
rors that  may  have  occurred  during  the  day.  The  process  is  very  easy. 
If  to  the  amount  of  the  Cash-Book  last  night,  we  add  the  amount  of  the 
cash  received  to-day,  and  deduct  the  amount  of  the  cash  we  have  paid, 
the  remainder  will  be  the  amount  of  the  Cash-Book  to-night.  If,  on  triai, 
we  find  this  is  not  the  case,  there  must  be  some  error.  Suppose,  for  in- 
stance, the  Cash-Book  last  night  amounted  to  £  100,000,  and  we  have  re- 
ceived £  40,000  and  paid  £  50,000  to-day,  then  will  the  Cash-Book  to- 
night amount  to  £  90,000.  The  trial  stands  thus  :  — 
o  169 


A  Treat  i*  on  Banking. 


1000    Paid- Par  Book         .        .         .    £ 

llook  to-night      .         .  •'...,,,, 

XI  , 

The  daily  balance,  therefore,  is  nothing  more  than  i!.  <>f  tin 

liny-Book;  and  the  only  books  employed  are  the  Ii..\.|'.,.,.k  and  the 
f\gh  Rooir  Bttt  as  these  book*,  when  finally  closed,  include  the  amount 
of  several  other  books,  the  trial  is  usually  made  (for  the  purpose  ,,;'  avoid- 
ing  alterations)  on  a  half-sheet  of  paper,  called  the  trial  paper,  previous 
to  ihose  entries  being  made,  and  then  the  amounts  of  t .  nil  books 

are  stated  separately,  in  the  following  manner :  — 

Or.  BANKING  HOUSE.  Cr. 

Amount  of  Camh-Book  lait  night 
.  1:..  .-  MBJh   BSJM    "<••  H-'l  1 

Do.  of  Bill-Journal 
Do.  of  Dbooum-Juurnal 


Amount  of  Paid-Pay-Book 
Do.  of  Clearing;- in-H(K)k* 
Do.  of  Balance  *  of  the  Clcnr- 


I  !<><>k  to-ni'_'lit     . 
Do.   of  Balance  ot    M»urv- 

' 
Do.  of  Discount-Register 

The  balance  of  the  clearing  t  is  always  to  the  credit  of  the  house ;  for, 
if  the  clearing  M  takes  out,"    then  the  bank  notes  paid  away  at  the 
Clearing-house  are  entered  in  continuation  of  the  clearing-out;  so  that, 
in  this  case,  the  balance  is  usually  thrown  a  small  sum  on  the  other 
When  the  clearing  is  finally  closed,  the  notes  forming  th  an- 

entered  in  continuation  of  the  clearing-in,  and  subsequently  in  the  (',,  -h- 
Book.    The  notes  entered  in  the  clearing-out  are,  of  course,  n< 
in  the  Cash-Book. 

WEEKLY  BALANCES.  —  The  daily  balance  checks  the  Waste-Books, 
the  Discount-Register,  the  Journals,  the  Day-Books,  the  Lists,  and  the 
Mooey- Books.  If  any  errors  occur  in  any  of  these  books  throughout  the 
day,  the  balance  will  be  wrong.  But  the  daily  balance  does  not  check  the 
Current-Account-Ledger,  though  this  is  the  most  important  l>ook  of  all. 
The  Ledger  is  therefore  "marked  off"  every  morning  against  the  I 
Book,  the  Bill-Journal,  and  the  Clearing-in-Book  :  but  this  is  not  u  sufii- 
cieot  check.  Hence  the  balances  of  all  the  accounts  in  the  Currcnt- 
Account-Ledger  should  be  taken  off  weekly  in  a  book  called  the  Cur 
Acconnt-Batance-Book,  and  added  together,  and  the  amount  made  to 
agree  with  the  balance  of  "current  accounts"  in  the  General-Ledger. 
IMS  is  usually  done  by  the  London  bunkers  quarterly  or  half  yearly. 
When  the  Ledger  is  kept  on  the  progressive  plan,  it  may  be  done  weekly 
without  much  trouble.  The  "  Current-Account-Balance-Book  "  should 
berated  so  that  the  names  of  the  parties  having  accounts  may  be  placed 
tinder  one  another  at  the  left-hand,  and  all  ti.  the  left-hand  page, 

and  the  whole  of  the  right-hand  page,  divided  into  double  cosh  columns : 


a  baak  doe*  not  "  clear"  these  itemi  are  of  coarse  omitted. 
Far  •»  •eeosK  of  the  book*  in  the  clearing  department,  see  the  section  on  Lon- 

170 


Book-keeping. 

one  column  for  the  balances  of  the  accounts  when  in  cash,  and  the  other 
for  the  balances  overdrawn.  On  this  plan  it  will  not  be  necessary  to 
write  the  names  more  than  once  in  seven  weeks. 

In  the  same  way  the  balances  of  the  Discount-Ledger  should  be  taken 
off  weekly  in  the  "Discount-Balance-Book."  The  balances  of  the 
General-Ledger  are  also  taken  off  weekly  in  the  "  General-Balance- 
Book  "  in  the  way  I  have  already  described. 

HALF-YEARLY  BALANCE.  —  The  weekly  balancing  of  the  Ledger  does 
not  preclude  the  necessity  for  a  half-yearly  balance.  The  usual  days  for 
balancing  are  the  last  days  of  June  and  December.  Some  banks,  how- 
ever, balance  on  the  last  Saturday  in  June  and  December,  and  others  on 
the  30th  of  June  and  on  Christmas-eve.  On  the  balancing  day  the  fol- 
lowing operations  are  passed  through  the  books:  —  1.  The  current  ac- 
counts will  be  debited  for  any  interest  or  commission  that  may  be  due 
from  the  party  to  the  bank.  —  2.  The  Current- Account-Ledger  will  be; 
balanced,  and  the  balance  will  be  brought  down  as  the  commencement  of 
the  transactions  of  the  ensuing  half-year.  —  3.  The  customers'  books 
must  be  balanced,  and  made  to  agree  with  the  Current-Account-Ledger. 
4.  The  interest  due  upon  the  outstanding  deposit  receipts  must  be  calcu- 
lated, and  the  sums  added  together.  —  5.  The  General-Ledger  must  be 
balanced,  and  at  the  December  balance  the  amount  standing  to  the  debit 
of  the  several  classes  of  expenditure  must  be  passed  to  the  credit  of  those 
accounts,  and  to  the  debit  of  profit  and  loss  account,  and  the  several 
sums  of  profit  that  have  been  realized  upon  Government  stock,  India 
bonds,  &c.,  are  transferred  to  the  credit  of  profit  and  loss  account. 

For  each  half  year  a  book  must  be  provided  to  be  called  the  Half- 
Yearly-Balance-Book.  This  book  will  contain  the'  following  entries :  — 

1.  A  balance-sheet  showing  the  balances  of  the  respective  accounts  in 
the  General-Ledger  in  the  same  way  as  the  weekly  balance  sheet. 
2.  A  debtor  and  creditor  balance-sheet,  showing  the  exact  condition  of 
the  bank.  —  3.  An  abstract  of  the  profit  and  loss  account,  viz :  — 

Abstract  of  Profit  and  Loss  Account,  from  Jan.  1,  to  Dec.  31. 


Dr. 

a 

To  Bank  Premises   .    .    . 

By  Interest  on  Bills  dis- 

By  Interest  on  Loans 

By   Commission  on    Cur- 

Stationery      

rent  Accounts   .... 

Incidental  Expenses     . 

By  Profit    on  Exchequer 
"Bills  &c      

Total  Expenses    .... 
Loss  on  bad  bills,  &c.  .    . 
Balance  in    favor  of   the 

171 


A  TrtaJUf  on  Banking. 

\     \  Ion  of  nil  the  babooes  of  the  current  accounts. 

5.  A  list  of  all  the  outstanding  deposit  receipts,  and  the  interest  due 


6.  A  list  of  all  discounted  bills  rvrrrnt,  i.  c.  bills  not  yet  due. 

7.  A  list  of  all  deposited  bills  current. 

8.  A  list  of  all  other  securities,  dbtfegoiehiBf  those  that  belong  to  the 
bank  from  those  that  are  lodged  by  its  customers. 

At  the  end  of  the  year  the  final  balance  of  the  profit  and  loss  account 
»  transferred  to  other  accounts  according  to  the  purposes  to  which  it  is  t» 
be  tppBtHJ  If  intended  to  be  held  as  a  *'  surplus  fund,11  it  is  transferred 
to  that  account.  If  intended  to  be  divided  among  the  proprietors,  it  is 
transferred  to  a  •*  dividend  account,"  \\hieh  is  raised  for  that  purpose.  If 
the  balance  of  the  profit  and  loss  account  should  be  against  the  hunk,  tin  n 
ist  remain  **  on  the  wrong  side  "  until  further  profits  shall  turn  Un- 
balance the  other  way. 

Beaidei  the  books  connected  with  the  business  of  banking,  every  joint- 
stock  bank  will  require, 

1.  A  SIUBEHOLDERS'-RF.GISTER.  —  In   this  book   the   names  of   the 
shamhcilrtfra  are  entered  chronologically  in  the  order  in  which  they  be- 
come  shareholders.    The  entry  includes  the  date,  the  name,  residence, 
number  of  shares,  and  sum  paid. 

2.  TRANSFER-REGISTER.  —  In  this  book  are  entered   the  transfer  of 
•hares  from  one  proprietor  to  another.     The  entry  includes  date  of  trans- 
fer, from  whom  transferred,  r  .  '••<! -.re r- folio,  to  whom  transferred, 
residence,  purchase-money,  and  tran>t>  r  s;amp. 

London,  tie        .        .        day  of        .         18 
To  tke  Diredon  of  Banking  Company. 

PbsMtojwqpcn  tktiteceuary  document  for  transferring        .        .         Shares,  from 

At  amnderatiomfor  irAicA      ....    Sluirr*  it  £ 

Broker, 

of 

If  a  proprietor  in  a  joint-stock  bank  wishes  to  dispose  of  his  shares,  he 
directs  a  stock-broker  to  sell  them  in  the  market.  A  Her  the  sale  the 
broker  gires  notice  to  the  directors  of  the  bank  in  the  pn  <-,  «lin<:  form. 
The  deed  of  transfer  is  then  made  out  according  to  a  printed  form  pre- 
pared by  the  bank.  This  agreement  is  liable  to  a  stamp  duty,  varying 
according  to  the  amount  of  the  purchase-money.  When  shares  nre  trans- 
ferred for  a  nominal  consideration,  say  five  or  ten  shillings,  the  stamp 
duty  is  thirty  shillings. 

The  debtor  and  creditor  balance-sheet  will  contain  the  same  amounts 
as  the  balance-ebeet  of  the  General-Ledger  (see  page  166),  but  differ- 
ently •mnfiiil.  They  may  be  disposed  according  to  the  following 
form :  — 

172 


Book-Keeping. 


Statement  of  the  Affairs  of  the  B 

ml:,  on 

Dr.            TRF, 

BANKING  COMPANY.         Cr. 

DUE  TO  THE  PUBLIC  ON 
CURRENT  ACCOUNTS. 

Head  Office,  Town    .    . 
Ditto,  Country   .    .    . 

• 

DUB  TO  THE  BANK  ON 
OVERDRAWN  ACCOUNTS 
Head  Office,  Town  .     . 
Ditto,  Country    .     . 

— 

- 

- 



- 

- 

Branch  B       .... 

Branch  B  

Total  Overdrawn  Acct's. 

BILLS  DISCOUNTED. 
Head  Office,  Town  .     . 
Ditto,  Country     .     . 

Branch  C  

Total  Current  Accounts  . 

DEPOSIT  RECEIPTS. 
Head  Office  

Branch  B        .... 

Total  Amount  of  Bills  ) 
Discounted  .    .    .    $ 

LOANS. 
Head  Office    .... 
Branch  A  
Branch  B  
Branch  C  

Total  Amount  of  Loans 

INVESTMENTS. 
Government.  Stock  .    . 
Exchequer  Bills  .    .     . 
India  Bonds    .... 
Other  Investments  .    . 

Total  Investments  .    . 
Total  available  Assets  . 

EXPENDITURE. 
Head  Office     .... 
Branch  A  
Branch  B  
Branch  C  

Branch  B      .... 

Branch  C  

Total  Deposit  Receipts   . 

INTEREST  ACCOUNT. 
Head  Office  

Branch  B  

Branch  C  

Total  Amount  of  Interest. 

FUND  FOB  BAD  DEBTS. 
Head  Office  

PAST-DUE  BILLS. 
Head  Office    .... 
Branch  A  
Branch  B  
Branch  C  

Total  Amount  of  Past-  > 
Due  Bills  .-.'..{ 

SUNDRY  ACCOUNTS. 
Stamp  Account  .     .    . 
House  Account   .    .    . 
Ditto  Branch  A.  .     . 
Ditto  Branch  B.  .     . 
Ditto  Branch  C.   .    . 

Total  



-- 

- 

Branch  A  

Branch  B  

Branch  C  

Total  Amount  of  Fund  ) 
for  Bad  Debts    .    .     \ 

PAID-UP  CAPITAL 

SUNDRY  ACCOUNTS. 

Forfeited  Shares    .    .    . 
Dividends  

- 

GENERAL  ACCOUNT  OF 
CASH. 
Head  Office    .... 
Branch  A  
Branch  B  
Branch  C  

Total  amount  of  Cash  . 
Total     .    .    . 

Unclaimed  ditto    .    .    . 
Surplus  Fund    .... 
Profit  and  Loss  .... 

Total  Sundry  Accounts  . 
Total   .... 

173 


A  Tnatite  on  Banking. 
The  following  is  the  scale  of  stamp  dutie*  upon  tho  transfer  of  shares 


WlM  tlM  pvdMM  moMjr  U  under  X  SO        .        .        £010 
For  X  10  mod  under        .        .      50     .       .        .in 

so  ....       150       .  i  iu 

1M  .         .         .         .      300  .         .         .30 

.100  .         .         .         .           5<M)  .         .            30 

500  ....      750  .         .         .60 

750  ....       1,000  .        .           '.»     11 

1,000  ....  2.000  .          .         .    12     0 

J.OOO  ....       3,000  .                  25     0 

3,000  ....   4,000  .         .         .    35     0 

4,000  ....       5,000  .                  45     0 

6.000  ....   6,000  .         .         .    55     " 

6,000  ....        7,000  65     0 

7,000  ....  8,000  .         .        .   75    0 

8,000  ....       9,000  85     0 

9,000  .         .         .           10,000  .         .         .   95     0 

The  bank  charges  a  fee  of  one  shilling  per  share  upon  five  shares  or 
above  for  making  the  transfer,  and  two  shillings  and  sixpence  j»  T  share 
for  any  number  less  than  five  shares.  Where  there  is  no  pecuniary  con- 
sideration the  charge  is  ten  shillings  for  each  transfer. 

tOFRiETOBS1  LEDGER.  —  In  this  ledger  each  proprietor  has  an  ac- 
count open,  in  the  same  way  as  in  a  cash-ledger.  lie  is  cn-divd  fur  tin- 
number  of  shares  ;  and  an  entry  is  made  of  tin-  dill'm  nt  instalim-ns  ir- 
may  pay.  When  he  sells  or  transfers  his  shares,  he  is  debited  the  shares, 
and  they  are  placed  to  the  credit  of  the  party  who  may  have  pun-based 
them.  The  entry  includes  the  date,  number  of  register,  calls  and  trans- 
fers, number  of  shares,  and  amount. 

III.  We  shall  now  consider  those  improvements  of  which  the  above 
system  is  capable,  so  as  to  render  it  more  efficient  in  large  establish- 
MBft. 

As  a  bank  increases  its  business,  it  becomes  of  importance  to  improve 
its  system  of  book-keeping,  and  to  adopt  means  of  increasing  tin-  etli- 
cieocy  of  its  clerk*.  A  large  establishment  can  generally  be  conducted 
with  a  less  proportionate  number  of  lru:d>  than  a  small  on--.  I:  admits 
of  a  more  extensive  application  of  the  principle  of  a  division  of  1,-ihor. 
In  a  small  bank,  one  clerk  may  keep  two  or  three  books  of  various  kinds, 
or  perhaps  act  as  both  cashier  and  accountant.  Hut  in  a  larjje  hank,  each 
clerk  is  uf  general  kept  wholly  to  one  employment.  T)  .....  diets  of  this 
separation  of  occupations  is  the  same  in  banks  as  in  inanniaet.n-ies  ;  and 
the  description  of  these  effects  given  by  Adam  Smith  will  equally  apply 

•  ,  baft 


"Whs  freal  iarrmi  in  the  quantity  of  work  whirh,  in  consequence  of  the  divi-ion 
of  Ubor,  UM  MOM  number  of  people  arc  capable  of  performing.  is  owin_-  to  three  dif- 
;  flnt,  to  the  increase  of  dexterity  in  every  particular  workman; 


the  Mviafof  time  which  U  commonly  lo>t  in  |.a»in^  tn.m  om-  species  of 
work  to  aaodwr  ;  aad  lastly,  to  the  inrention  of  a  (yri-iit  imml»T  of  iiiin-liiiu-s  which 
ciliuu  aad  abridge  labor,  sad  enable  one  man  to  do  the  work  of  many." 

The  increase  of  dexterity  by  constant  practice  is  very  observable  in 

174 


Book-keeping. 

the  practice  of  "  casting  up."  A  clerk  who  is  much  accustomed  to  this 
operation  will  cast  up  a  long  column  of  figures  with  singular  quickness 
and  accuracy.  It  is  also  very  observable  in  "  calling  over."  Besides 
owing  to  the  abbreviations  we  have  mentioned  in  p.  152,  a  clerk  in  call- 
ing over  will  speak  so  rapidly  that  an  unpractised  ear  will  hardly  be  able 
to  follow  him.  Mr.  Babbage  gives  the  following  instance  of  great  dex- 
terity acquired  by  practice  :  — 

"  Upon  an  occasion  when  a  large  amount  of  bank  notes  was  required,  a  clerk  in  the 
Bank  of  England  signed  his  name,  consisting  of  seven  letters,  including  the  initial  of 
his  Christian  name,  five  thousand  three  hundred  times  during  eleven  working  hours, 
and  he  also  arranged  the  notes  he  had  signed  in  parcels  of  fifty  each." 

The  loss  of  time  in  passing  from  one  operation  to  another  is  as  obvious 
in  mental  processes  as  in  those  which  are  purely  mechanical. 

"  When  the  human  hand  or  the  human  head  has  been  for  some  time  occupied  in  any 
kind  of  work,  it  cannot  instantly  change  its  employment  with  full  effect.  The  muscles 
of  the  limbs  employed  have  acquired  a  flexibility  during  their  exertion,  and  those  to 
be  put  into  action  a  stiffness  during  rest,  which  renders  every  change  slow  and  unequal 
in  the  commencement.  A  similar  result  seems  to  take  place  in  any  change  of  mental 
exertion ;  the  attention  bestowed  on  the  new  subject  is  not  so  perfect  at  the  first  com- 
mencement as  it  becomes  after  some  exercise."  * 

The  invention  of  expedients  for  facilitating  and  abridging  labor  is  also 
as  common  in  a  bank  as  in  a  manufactory. 

Mr.  Francis  has  recorded,  in  his  History  of  the  Bank  of  England,  a 
variety  of  improvements  introduced  into  that  establishment  by  Mr.  William 
Rae  Smee,  a  son  of  the  chief  accountant. 

He  proposed  art  "alteration  in  the  cheque  office,  by  which  he  stated  that 
the  work  which  employed  three  principals  and  twenty-one  clerks  would  be 
done  more  effectually  by  two  principals  and  seven  clerks.  In  the  circula- 
tion department,  the  posting  which  formerly  took  fifty  now  employs  only 
eight  clerks.  And  the  whole  of  that  department,  if  now  conducted  upon 
the  old  system,  would  probably  require  nearly  eighty  additional  assistants. 
In  the  National  Debt  Office  Mr.  Smee  introduced  such  measures  that 
"  the  directors  were  enabled  so  far  to  consult  the  accommodation  of  the 
public  as  to  enable  the  transfers  in  the  various  offices  to  be  made  eight  or 
nine  days  later  than  usual,  the  business  which  formerly  occupied  about 
thirty-two  days  being  accomplished  in  about  twenty-three."  t 

Similar  improvements  have  been  introduced  into  commercial  book- 
keeping. 

"  The  old  method  of  journalizing  and  posting  each  transaction  separately,  unneces- 
sarily swells  the  accounts  in  the  ledger  with  a  multiplicity  of  figures,  which  greatly  in- 
creases the  difficulty  of  balancing,  and,  to  say  nothing  of  extra  labor  and  loss  of  time, 
the  liability  to  error  is  always  in  proportion  to  the  number  of  entries,  and  vice  versd. 
If  a  hundred  sums  are  posted  when  one  would  answer,  then  a  hundred  chances  of 
error  are  incurred  where  only  one  was  necessary ;  and  in  the  event  of  an  error  in  ad- 
justing the  accounts,  a  hundred  entries  must  be  called  over  and  examined,  instead  of 
one.  (Double  Entry  Elucidated,  by  B.  F.  Foster,  p.  18.) 

*  The  Economy  of  Machinery  and  Manufactures,  by  Chnrles  Babbnpe. 
t  History  of  the  Bank  of  England :  its  Times  and  Traditions ;  by  John  Francis. 
Vol.  II.  p.  141. 

175 


A   Trtalist  on  Banking. 

The  expedients  introduced  to  improve  any  system  of  book-keepinr, 

,\     i'.-  •  .     •  .          the  sai  ng  of  time  <lir«-tlii  h\  n]^.<r<-\\.\".n^  tin- 

entries,  or  to  save  time  imlirrelly  by  new  modes  of  preventing  or  detect- 

\        ;••:•,      '..-      ,,'.,.  T\.     i.     lll.lt      .'I      IlimUte     id'era'lon,     ll.lpliV 

^orthf  of  being  adopted  in  a  small  hnnk,  where  it  would  save  hut  a  few 
minute*  a  day,  may  be  very  properly  adopted  in  a  large  establishment, 
whole  the  time  saved  would  be  in  proportion  to  th<  •  <>t 

business.  Sometimes  an  entry  may  be  shortened  by  omitting  some  of  the 
particulars.  Thus,1  where  we  have  been  accustomed  to  eu-.-r  uith  every 
bill,  the  name  of  the  last  endorser,  the  drawer  ami  his  residence,  the  ac- 
ceptor and  his  residence,  the  date,  term  when  due,  and  the  amount,  u. 
may  properly,  perhaps,  omit  some  of  these  items.  Or  where  we  have  re- 
pealed the  same  entry  in  several  books,  we  may  enter  it  in  iVwr  hooks, 
or,  perhaps,  make  the  individual  entries  in  only  one  book,  and  enter  the 
total  amount  in  the  others,  or,  at  other  times,  tin-  whole  form  of  a  book 
may  be  changed,  and  we  may,  by  a  now  arrangement,  obtain  «h.-  same 
results  more  clearly  and  in  less  time.  Almost  every  bank  will  occasion- 
ally make  some  alteration  of  this  kind  as  its  business  may  require.  And 
even  each  accountant  has  usually  some  little  expedients  of  his  own  for 
facilitating  his  daily  operations.  Wo  will  notice  a  few  of  those  amend- 
Bsaati  that  have  been  adopted  with  the  view  of  saving  time  and  labor  in 
some  of  our  banking  establishments. 

Some  large  banks  have  adopted  "  the  horizontal  system  of  book-keep- 
ing," which  is  in  some  respects  an  improvement  on  the  systems  described 
in  the  former  editions  of  this  work.  The  chief  difference  is  in  the  mode 
of  ruling  the  Received  and  the  Paid- Waste-Books. 

The  Received-Waste-Book,  instead  of  being  ruled   as  described   in 

p.   155,  has  four  cash  columns,  three  at  the  left  hand  as  you  face  the 

book,  and  the  fourth  at  the  right  hand,  with  a  space  between  the  third  and 

i    .       .    '.'       V   JteOM  of  a  credit  entry,  instead  of  t).-:ir_r  plac-'d 

under  one  another,  a*  in  the  former  system,  will  be  placed  -,-;.  ;i.i-e'y  in 
the  first  three  columns,  and  the  total  in  the  fourth  column.  Thus,  if  a 
sum  of  .£543  10*.  Id.  be  received  from  Mr.  Smith,  and  this  sum  con- 
sists of  £3  10*.  Id.  in  coin  or  money,  £  100  in  a  Bank  of  England 
note,  and  .£440  in  a  cheque  on  Jones,  Loyd,  At  Co.,  the  entry  will  stand 
thus:  — 


Ms*a*y.^ 

s"-  * 

SradrU*. 

NUM. 

Total. 

L 

». 

d 

£ 

£ 

> 

-/. 

Smith. 

£ 

f. 

d. 

* 

10 

• 

100 

440 

«• 

0 

Jo-ics,  Loyd,  &  Co. 

543 

10 

7 

Thus  h  is  seen  thit  tho  first  column  is  for  moncv,  the  second  column 
for  bank  notes,  and  the  third  column  for  '•  sundries/1  that  is,  for  all  other 
articles;  and  these  three  columns  are  added  together  "  horizontally,"  and 
the  total  brought  OUt  into  the  fourth  cash  rolnmn  at  the-  ri^'nt  hand.  It 
will  be  observed,  that  the  cashier  has  to  add  the  items  together,  hot  long- 

176 


Book-keeping. 


ways,  but  cross-ways,  —  not  longitudinally,  but  "  horizontally."  After  a 
little  practice,  one  way  is  just  as  easy  as  the  other. 

Some  cashiers  prefer  having  two  columns  only  at  the  left  hand,  and 
two  at  the  right  hand,  with  the  space  between  the  second  and  third  co- 
lumn ;  as  the  numbers  of  the  bank-notes,  and  the  names  of  the  bankers 
on  whom  the  cheques  are  drawn,  can  then  be  placed  on  the  same  line ; 
but  this  is  not  a  matter  of  much  consequence. 

Now,  if  you  "  cast  up  "  the  first  left-hand  column,  you  will  have  at  the 
close  of  the  day  the  total  amount  of  money,  that  is,  coin,  received  during 
the  day.  If  you  cast  up  the  second  column,  you  will  have  the  total 
amount  of  bank  notes.  The  third  column  will  give  the  total  amount  of 
"  sundries."  And  the  amount  of  these  three  columns  together  will  be 
equal  to  the  fourth  column,  containing  the  total  amount  of  the  credits.  If 
this  should  not  be  the  case,  there  must  be  some  error,  which  must  be  dis- 
covered forthwith.  Thus  the  horizontal  Received- Waste-Book  is  a  check 
upon  itself.  As  soon  as  the  cashier  gets  to  the  bottom  of  a  page,  he  casts 
up  his  book,  and  sees  that  the  three  columns  are  exactly  equal  to  the 
fourth.  Thus  he  keeps  his  book  right  as  he  goes  on.  Whereas,  in  the 
former  system,  any  error  in  the  Received-Waste-Book  would  not  be  dis- 
covered till  the  General  Balance  was  tried  at  the  close  of  business,  and 
not  then,  perhaps,  until  after  a  long  course  of  "  marking  off." 

To  simplify  my  explanation,  I  have  described  the  Received-Waste- 
Book  as  having  only  four  cash  columns,  and  these  are  perhaps  enough  for 
a  small  bank.  But  large  establishments  have  sometimes  seven  or  eight, 
perchance  in  the  following  order :  —  1.  Money,  that  is,  coin.  2.  Bank- 
notes. 3.  Parcels  of  bank-notes,  called  sundries.  4.  Country  notes. 
5.  Checks  on  clearing  bankers.  6.  Checks  on  bankers  who  do  not  clear. 

7.  Checks  on  our  own  bank.  a  space.  8.  The  total  amount  of 

the  credit. 

The  horizontal  Paid-Waste-Book  is  ruled  with  three  cash  columns ; 
one  to  the  left  for  the  amount  of  the  cheque  paid  ;  then  an  open  space  for 
the  name  ;  then  a  column  for  the  bank-notes  ;  and  another  for  the  money, 
that  is,  coin.  The  London  bankers  do  not  pay  away  any  bills  or  country 
notes  in  exchange  for  cheques,  but  only  Bank  of  England  notes  and  coin. 
The  entry  stands  thus  :  — 


Amount  of 
Cheque. 

Name,  and  No.  of  Bank-Note. 

Bank 

Notes. 

Money. 

£ 

s. 

d. 

White.                         1473. 

£ 

£ 

a. 

</. 

101 

4 

3 

100 

I 

4 

a 

The  amount  of  the  columns  containing  the  bank-notes  and  the  money 
will  of  course  be  equal  to  the  column  containing  the  amount  of  the 
cheques.  And  thus  this  Paid-Waste-Book  contains  a  check  upon  itself. 

The  horizontal  Paid-Waste-Book  may  have  at  the  left  hand  two  cash 
columns,  one  for  the  town  and  the  other  for  the  country  departments,  and 
also  a  separate  column  for  the  country  notes  ;  thus  :  — 

177 


A  TVtttu*  on 


TWw* 

OMMNTf. 

i          :r. 

K5T 

NUM. 

K 

i  .  : 

•MS* 

Thk  prrvcnts  the  necessity  for  having  both  a  Town  and  a  Country  I ' 
Worts-Book,  while  the  two  departments  are  still  kept  distinct.     The 
country  notes  are  also  separated,  and  can  he  checked  by  tl>< 

When  all  are  added  together,   the   t,,-d   of  the   three  columns  at  the.    left 
must  be  equal  in  amount  to  the  total  of  the  two  columns  at  the  rl^ht  hand. 
The  articles  paid  must  be  equal  to  the  hank-notes  and  money  which  • 
tawed  in  payment 

We  101111  now  point  out  some  of  the  advantages  of  the  horizontal  sys- 


|   ;::    |f    k-  •   ,'  Mj    »     U  a-'e- 1'..  «  •'**. 

Pint  As  alt  t 


the  receipts  and  payments  of  money,  that  is,  coin,  are  en- 
individually  in  the  Received  an<l  1'aid  Waste-Books,  and  the 
added  together,  it  will  not  be  necessary  that  these  sums  be 
individually  into  the  Money-Hook.  The  total  amount  only  of  each 
is  entered  in  the  Money-Book  at  the  close  of  the  day's  business. 
and  the  Blooey-Book  is  balanced.  Thus,  all  the  time  employed  in  mak- 
ing the  entries  individually  in  the  Money-Book  is  suve.l. 

{Secondly.  As  all  the  credits  to  current  accounts  are  added  together  in 
the  Received-Waste-Book,  it  is  not  necessary  they  should  be  entered  in- 
dividually in  the  Day-Book.  They  can  be  individually  posted  direct  into 
the  Ledger,  and  the  total  only  be  entered  in  the  Day-Book.  The 
remark  will  apply  to  the  Paid- Waste-Book.  This  is  another  saving  of 
time  and  labor. 

Thirdly.  Every  Waste-Book,  as  we  have  already  intimated,  is  a  check 
itself.  We  have  spoken  of  a  Received- Waste-Book  and  a  raid- 
-Book  as  though  a  hank  had  but  one,  and  in  small  banks  this  is  the 
But  in  large  banks  there  are  seven  or  eight  cashiers  or  more,  each 
having  a  Received- Waste-Book  and  a  1 'a id- Waste-Book  for  the  town  de- 
partment, and  another  Received- Waste- Book  and  Paid- Waste-Book  for 
the  country  department,  with  a  Supplem.'ir;!  d- Waste-Book,  and 

a  Supplementary-Paid- Waste-Book,  and  a  Money-Book  besides.     Now,  it 
is  a  great  advantage  to  have  the  means  of  keeping  all  these  books 
from  errors  during  the  day,  and  to  know  at  night  that  they  are  all  cor: 
It  the  **  Balance     be  wrong,  the  field  of  inquiry  is  thus  very  much  limit- 
ed, and  the  time  that  would  otherwise  be  employed  in  cheeking  the  \\ 
Books  is  devoted  to  the  examination  of  the  other  books  of  the  bank. 
Fourthly.    This  plan  gives  the  means  of  checking  separately  tho^e 
that  have  a  column  appropriated  to  them.     Take,  fur  example,  the. 
I'          '     '•          lfw«   add   '•>  the  amo-.in:  of  Innk-notes  ,,n  hand 
at  received  to-day,  and  deduct  the  amount  paid  »way, 
the  rnsasintifir  should  be  the  amount  on  hand  to-night.     Wh--n  this  is  ih« 
the  bank-notes  are  right.     In  the  same  way  we  may  check  the 

178 


Book-keeping. 

money  columns,  the  clearing  columns,  &c.  Thus,  when  the  trial  balance 
is  wrong,  we  can  check  these  items  separately,  and  thus  more  readily  dis- 
cover the  error.  Without  this  expedient,  we  should  have  to  "  mark  off" 
the  whole  business  of  the  day. 

It  will  be  observed  that  the  above  Waste-Books  refer  only  to  receipts 
and  payments  on  current  accounts.  All  other  receipts  and  payments  are 
entered  in  a  Supplementary-Receipt-Book  and  a  Supplementary-Paid- 
Book.  These  books  are  ruled  in  the  same  way  as  the  other  Waste-Books, 
and  they  embody  entries  in  connection  with  deposit  receipts,  received  or 
paid,  credits  or  debits  to  interest  accounts,  debits  to  salaries,  taxes,  inci- 
dental accounts,  &c.,  &c.  All  these  items  are  then  entered  in  the  Day- 
Book,  from  whence  they  are  posted  into  the  General-Ledger.  A  book  is 
also  provided,  usually  called  a  Transfer-Book,  in  which  are  entered  all 
the  cheques  on  the  bank  paid  in  by  other  customers,  as  these  merely 
cause  a  transfer  of  the  amount  from  one  customer  to  another. 

Books  which  are  designed  chiefly  as  registries  or  summaries  should  be 
kept  on  the  horizontal  system.  Thus,  a  London  bank  which  keeps  an  ac- 
count with  the  Bank  of  England,  will  have  to  lodge  to  its  credit  notes, 
gold,  silver,  post-bills,  cheques,  dividend  warrants,  &c. 

To  keep  a  registry  of  this,  a  book  may  be  opened  horizontally,  —  the 
first  column  at  the  left  hand  being  the  date,  and  then  these  words  being 
entered  over  separate  columns,  at  the  top  of  the  page ;  afterwards  a  col- 
umn for  the  total  amount  of  all  these  items,  then  a  credit  column  for  the 
cheques  drawn  each  day,  and  then  the  daily  balance.  If  this  book  be 
made  of  such  a  size  as  to  contain  about  thirty  lines,  then  each  page  will 
contain  the  transactions  of  a  month.  And,  by  adding  up  the  columns,  the 
figures  at  the  bottom  of  the  page  will  show  the  separate  amounts  of  notes, 
gold,  silver,  &c.,  paid  into  the  Bank  of  England  in  the  course  of  a 
month.  By  comparing  the  different  pages,  it  will  be  seen  on  what 
months  the  largest  or  the  smallest  sums  are  paid  into  the  bank. 

In  constructing  tables,  it  is  also  best  to  follow  the  horizontal  system. 
Thus,  to  keep  a  record  of  the  weekly  returns  of  the  Bank  of  England,  it 
is  best  to  arrange  the  items  into  columns,  with  the  heading  at  the  top  of 
each  column,  the  first  column  containing  the  dates  of  the  several  returns. 
It  will  then  be  easy  to  trace  the  fluctuations  in  any  one  item ;  such,  for 
instance,  as  the  "  Public  Deposits,"  the  "  Private  Deposits,"  the  "  Rest," 
&c.  Some  of  the  Returns  published  in  the  Appendix  to  the  Parlia- 
mentary Evidence  of  1847  have  been  arranged  on  this  principle. 

We  will  now  notice  some  further  improvements  that  have  sometimes 
been  adopted  by  large  banks  in  their  system  of  book-keeping.  The  great 
object  of  all  these  improvements  is,  as  we  have  already  mentioned,  either 
to  save  time  directly,  in  making  the  entries,  or  indirectly,  by  preventing 
or  discovering  errors.  These  are,  — 

1.  The  abolition  of  the  Discount-Register.  Here  the  bills  are  entered 
at  once  in  the  Discount-Ledger,  under  the  names  of  the  respective  parties 
for  whom  they  are  discounted ;  and  the  total  amount  of  bills  discounted 
each  day  is  entered  in  the  Day-Book,  from  the  Interest-Book,  which  con- 
tains the  calculations  of  discount.  The  only  objection  to  this  plan  is,  that 
the  space  in  the  Discount-Ledger  does  not  admit  of  so  full  a  description 

179 


A   TVratiM  Ml  Banking. 

of  the  bill  as  it  anally  given  in  the  Discount-Register.    The  Bill-Hoi.' 
is  also  abolished  in  the  same  way. 

J,  The  adoption  of  a  Cbeck-Ledgrr  facilitate*  the  discovery  of  error*. 
and  thus  diminishes  the  time  employed  in  searching  for  them.  Though 
tbsi  book  is  called  a  Check-Ledger,  it  is  M..I  kept  |aager>wisr.  It  is  ruled 
•  a  cash  column  on  each  aide  the  pot'".  In  tin-  column  opposite  your 
left  hand  you  enter,  from  the  cheques  tlin:i-.-l\.-s,  all  tin-  Hie<iues  paid 
:ig  the  day.  In  the  right-hand  column  you  enter  from  tin-  l\< <-<-ived- 
Waesp  Books  all  the  credits  of  the  day.  When  you  add  up  tl,<  -<•  two 
columns,  they  will  of  course  agree  with  the  amounts  of  the  Paid-Waste- 
Bonk  and  the  Received- Waste- Book.  Thus  the  accuracy  of  the  Check- 
Ledger  is  insured.  Now,  where  the  balances  of  the  Current-Account- 
Ledger  are  checked  every  week,  you  employ  the  Check-Ledger  to  test 
their  accuracy  in  this  way.  If  to  the  amount  of  the  balances  of  the  Cur- 
rent-Aecount-Ledger  last  week,  you  add  the  total  credits  entered  in  the 
Check-Ledger  during  the  week,  and  deduct  the  total  dehits  entered  in  the 
Check-Ledger  during  the  week,  the  remainder  will  show  the  total  amount 
of  the  balances  of  the  Current-Account-Ledger  for  the  present  week. 
Each  Current-Account-Ledger  will  have  a  Check-Ledger,  and  thus  eaeli 
Ledger  will  be  checked  separately,  so  that  when  the  total  balance  is 
wrong,  it  will  at  once  be  seen  in  which  Ledger  the  error  has  occurred. 

Tine  is  sometimes  lost  by  a  clerk  taking  up  the  wrong  book,  opening 
it,  putting  it  down,  and  then  taking  up  the  right  one.  A  cashier,  for  in- 
stance, will  sometimes  take  up  the  Paid- Waste-Book  instead  of  I  lie  K<  - 
ceived- Waste-Book.  To  prevent  this,  the  two  books  may  have  covers  of 
:  colors, — one  white,  the  other  green.  Time  may  be  lost  by  tun 
wanting  the  same  book  at  the  same  time.  The  ledger-keeper  may 
to  post  from  the  Received- Waste-Book  when  the  cashier  is  using  it. 
To  prevent  this,  there  may  be  two  sets  of  Waste-Books,  —  one  for  Mon- 
days, Wednesdays,  and  Fridays,  and  the  other  for  Tuesdays,  Thursdays, 
and  Saturdays ;  and,  to  prevent  mistakes,  the  names  of  the  days  should 
be  written  in  large  letters  on  the  covers  of  the  books. 

IV.  We  will  now  make  a  comparison  between  the  system  of  Book- 
keeping practised  by  Merchants,  and  that  practised  by  Bankers 

The  merchants  have  their  Waste-Book,  Journal,  Ledger.  The  bank- 
ers have  their  Waste-Book,  Day-Book,  Ledger. 

In  both  cases,  the  Waste-Book  is  the  book  in  which  transactions  are 
first  entered.  But  this  book  is  capable  of  subdivision  :  it  contains  a  record 
of  various  transactions,  some  of  which  may  be  entered  in  separate  books. 
Bankers  have  their  Received,  Paid,  and  Supplementary  U  ast. '-Hooks; 
also  their  Deposit-Reccipt-Book,  Discount-Registers,  and  other  books  sub- 
sidiary to  the  Waste-Book.  So,  merchants  have  their  Waste-IJ«x>k  sub- 
divided  into  various  books,  according  to  the  nature  of  the  transactions. 
There  is  the  Invoice-Book,  containing  an  account  of  all  goods  purchased  ; 
the  Sales-Book,  containing  an  account  of  all  goods  sold;  a  book  for 

Bills  Receivable,"  containing  a  list  of  all  bills  in  the  merchant's  hands, 
which  when  due  he  will  rrreirc  ;  another  for  bills  payable,  containing  a 
Ik;  of  all  bilk  be  baa  accepted,  and  which  when  due  he  will  have  to  pav  ; 

ISO 


Book-keeping. 

a  Cash-Book,  containing  an  account  of  all  cash  he  receives  or  pays  away  ; 
and  several  others,  varying  according  to  the  character  and  extent  of  the 
business.  Now  all  these  subdivisions  of  the  merchant's  Waste-Book  re- 
semble those  of  the  banker's  in  two  things  —  first,  they  are  all  kept  chro- 
nologically—  they  contain  a  record  of  the  transactions  in  the  order  of 
time  in  which  they  occurred  :  and,  secondly,  all  the  transactions  thus  re- 
corded must  afterwards,  upon  the  system  of  double  entry,  pass,  either 
individually  or  in  totals,  through  the  book  which  merchants  call  a  Journal, 
and  bankers  call  a  Day-Book. 

The  words  "  Journal "  and  "  Day-Book  "  have  the  same  meaning  ; 
and  in  this  instance  the  use  of  the  two  books  is  similar.  But  in  the  mer- 
chant's Journal  individual  transactions  may  be  entered,  while  in  the  bank- 
er's Day-Book  they  are  always  entered  in  totals.  Thus  the  total  amount 
of  "  Bills  Discounted,"  and  the  total  amount  of  credits  and  payments  on 
current  accounts,  are  entered  in  the  Day-Book,  but  not  the  individual 
items.  Another  difference  is,  that  over  each  entry  in  the  merchant's 
Journal  you  state  to  what  account  it  is  to  be  posted ;  for  every  entry  is 
posted  to  two  accounts  —  to  the  debit  of  one  account,  and  to  the  credit  of 
the  other.  And  this  is  denoted  by  Dr.  being  placed  before  the  name  of 
the  account  to  be  debited.  Thus,  if  a  merchant  buys  some  goods  for 
ready  money,  the  Journal  entry  is  preceded  by 

Goods  Dr.  to  Cash  ; 

implying  that  the  account  "  Goods "  is  to  be  debited,  and  the  account 
"  Cash  "  to  be  credited.  On  the  other  hand,  if  he  sells  goods  for  ready 
money,  the  transaction  will  be  journalized  thus, 

Cash  Dr.  to  Goods. 
If  he  sells  goods  upon  credit  to  John  Brown,  it  will  be, 

John  Brown  Dr.  to  Goods. 

If  he  sells  goods  for  a  bill  of  exchange,  it  will  be, 
Bills  Receivable  Dr.  to  Goods. 

If  he  sends  goods  abroad  as  a  speculation,  in  the  ship  Adventure,  he  may 
raise  an  account  for  the  ship,  and  say, 

Ship  Adventure  Dr.  to  Goods. 

The  entries  in  the  banker's  Day-Book  are  made  daily,  but  the  entries 
in  the  merchant's  Journal  are  generally  made  once  a  month. 

THE  LEDGER.  —  We  have  stated  that  in  the  merchant's  Ledger  even- 
entry  is  made  twice  —  one  account  being  debited,  and  another  credited  — 
and  these  two  accounts  are  indicated  in  the  Journal.  This  is  what  is 
called  book-keeping  by  double  entry.  If  it  be  asked,  whether  bankers 
keep  their  books  by  double  entry  ?  the  answer  is,  that  those  bankers 
who  have  no  General-Ledger  (and  this  is  the  case  with  not  a  few  of  the 
private  bankers)  do  not  keep  their  books  by  double  entry.  The  Current- 
Account-Ledger  is  not  kept  by  double  entry.  It  contains  none  but  per- 
sonal accounts,  and  its  accuracy  is  tested  only  by  the  periodical  balancings, 
p  181 


A  TYiMfiM  on  Hanking. 
Thn  banker**  Ledger,  that  correspond*  in  this  rcupert  with  ill.-  men-hunt'* 

Ixxlger,     is     n.  '  Ledger,     l.ltt      the     (  M-||,-IM!- L«-il»iT. 

This  is  kept  by  double  entry.  In  n  ledger  kept  hy  d,  .•!!•!••  entry,  tin-  sum 
.  1  the  debit  h^iy****  will  be  equal  to  the  sum  of  all  tin;  credit  hal- 
onoes;  and  the  MUD  of  all  the  debit  amounts  will  be  equal  to  the  sum  of 
all  the  credit  amounts.  When  this  i*  not  the  ease  th.-iv  is  .-in  error  in 
some  of  the  accounts.  This  is  the  case  with  tin-  LIMIT'S  < ;.  ner.d- 
Lsdger.  But,  a*  the  transactions  are  not  posted  individually,  hut  only  in 
totals,  the  double  entry  does  not  appear  on  the  face  of  tin  a. ••  -omits. 
(i  bill  be  discounted  for  a  customer,  and  the  amount  placed  to 
the  credit  of  his  current  account,  the  Journal  entry,  on  the  principle  of 
mercantile  book-keeping,  would  stand  thus :  — 

Bill*  Ducnnted  Dr.  to  Currtnt  Accotmtt. 

But  the  bill  discounted  is  placed  to  the  debit  of  the  account  of  "  Bills  Dis- 
counted,*1 in  a  total  of  all  the  hills  discounted  on  that  day.  And  the 
•mount  is  placed  to  the  credit  of  Current  Accounts,  in  the  total  of  all  the 
sums  received  to  the  credit  of  Current  Accounts  on  that  day.  Thus,  the 
"double  entry,"  though  equally  real,  is  not  so  apparent  as  though  the 
Inns**  litMM  were  posted  individually. 

So,  again,  if  a  country  banker  should  discount  a  bill,  and  the  customer 
ask  fora  draft  on  his  agent  in  London,  the  Journal  entry,  on  the  com- 
mercial system,  would  stand  thus  :  — 

BUI*  Discounted  Dr.  to  Dra/lt  on  London. 

It  would  go  to  the  debit  of  "  Bills  Discounted,"  in  the  total  of  all  the  bills 
discounted  that  day,  and  it  would  go  to  the  credit  of  "  Drafts  on  London,11 
in  the  total  of  all  the  drafts  on  London  issued  on  that  day. 

The  accounts  in  a  merchant's  ledger  are  usually  classified  into  !'•  r- 
sonal  Accounts,  Real  Accounts,  and  Profit  and  Loss  Accounts.  The 
Accounts  are  the  accounts  of  persons  who  may  owe  the  mer- 
ey,  or  to  whom  he  may  owe  money.  The  Real  Accounts  are 
denoting  property,  such  as  cash,  bills  receivable,  bills  payable, 
merchandise,  ship  adventure,  &c.  The  Profit  and  Loss  Accounts  an; 
rent,  poniaiissionn,  expenses,  and  all  other  accounts  which  are  ultimately 
transferred  to  the  debit  or  tin-  credit  of  the  Profit  and  Loss  Account. 

The  banker's  General-Ledger  has  no  Personal  Accounts,  as  these  are 
all  kept  in  the  Current- Account- L<-d:_rer.  Tin- usual  accounts  are  those  I 
have  enumerated  in  page  166,  and  are  all  either  Keul  Accounts  or  Profit 
and  Loss  Accounts. 

It  would  be  quite  possible  (but  not  desirable)  to  introduce  all  the  Per- 
sonal Accounts  into  the  banker's  General-Ledger,  and  thus  to  form  the 
rent* Account-Ledger  and  the  (renerul-Ijedger  into  one,  and  keep  the 
whole  by  double  entry.  In  this  case  we  should  omit  the  totals  of  Current 
Accounts,  now  introduced  into  the  General-Ledger,  and  insert  every 
triuaaclMNi  individually.  If  John  Hrown  drew  a  cheque  on  the  hank,  the 
Journal  entry  would  stand  thus :  — 

J'Jm  Drown  Dr.  to  Guk. 

182 


Book-keeping. 

And  if  he  paid  in  money  to  his  credit,  the  Journal  entry  would  stand 
thus :  — 

Cash  Dr.  to  John  Brown. 

All  the  entries  passed  to  the  Dr.  and  Cr.  of  these  Personal  Accounts 
would  of  course  pass  to  the  Cr.  and  Dr.  of  Cash.  Indeed,  all  the  entries 
to  the  Dr.  and  Cr.  of  Cash  would  be  the  same  as  are  now  made  in  the 
Check-Ledger,  except  that  the  debtor  column  would  be  called  creditor, 
and  the  creditor  column  would  be  called  debtor.  By  the  use  of  such  a 
Check-Ledger  as  we  have  described,  page  179,  (for  there  are  various 
kinds  of  Check-Ledgers,)  the  Current  Accounts  are  virtually  kept  by 
double  entry ;  and  we  have  the  additional  advantage  that,  when  there  are 
more  than  one  Ledger,  we  are  enabled  to  check  each  Ledger  separately. 

To  accountants  in  banks  where  a  General-Ledger  is  not  kept,  it  appears 
strange  that  "  Cash  "  should  be  credited  for  money  which  is  paid  away, 
and  debited  for  money  which  is  received.  But  this  strangeness  will 
vanish,  if  for  the  word  "  Cash  "  they  would  fix  in  their  mind  the  word 
"  Cashier."  If  they  had  an  account  with  a  cashier,  they  would  of  course 
debit  him,  as  they  do  their  banker,  for  all  moneys  they  paid  into  his  hands, 
and  credit  him  for  all  moneys  they  drew  out.  And  the  difference  between 
the  amounts  of  these  debits  and  credits  would  be  the  balance  either  in 
their  favor,  or  against  them. 

In  thus  comparing  the  commercial  and  the  banking  systems  of  book- 
keeping, I  have  hitherto  supposed  that  all  merchants  keep  their  books  by 
double  entry.  But  this  is  not  always  the  case  with  the  smaller  houses. 
And  then  their  system  more  nearly  resembles  the  system  of  those  bank- 
ers who  do  not  keep  a  General-Ledger. 

"  In  keeping  books  by  single  entry,  the  Daily-Books  are  kept  in  the 
same  manner  as  in  double  entry,  with  the  exception  of  a  column  of  ref- 
erence to  the  Ledger  in  each  book,  which  takes  the  place  of  a  column  of 
reference  in  the  Journal  —  this  book  being  dispensed  with.  The  entries 
are  posted  directly  from  the  Daily-Books  into  the  Ledger.  In  the  Ledger, 
by  single  entry,  strictly  speaking,  there  ought  to  be  only  one  kind  of  ac- 
counts ;  namely,  Personal  Accounts,  including  all  persons  to  whom  a 
merchant  becomes  indebted,  and  all  persons  who  become  indebted  to 
him."  (  Wallace's  Pocket-Guide  to  Commercial  Book-keeping.) 

It  will  be  seen  from  this  account,  that,  in  mercantile  book-keeping  by 
single  entry,  the  merchant's  Ledger  resembles  the  Current-Account- 
Ledger  of  the  banker.  In  single  entry  the  merchant  dispenses  altogether 
with  his  Journal ;  but  the  banker  usually  retains  his  Day-Book,  even  when 
he  does  not  keep  a  General-Ledger.  But,  in  this  case,  the  Day-Book 
contains  only  the  debits  and  credits,  individually,  of  the  Current  Ac- 
counts, which  are  posted  afterwards  into  the  Current-Account-Ledger. 
In  the  horizontal  system,  as  we  have  stated,  the  debits  and  credits  of  the 
current  accounts  are  not  entered  individually  in  the  Day-Book,  but  the 
total  amounts  are  taken  from  the  Paid  and  Received  Waste-Books. 

183 


A  Trtatue  on  Banking. 


SECTION  XIII.  — HANKINtS  CALCULATIONS. 

Wnn  a  bill  is  discounted,  the  party  is  credited  for  the  full  amount,  nnd 
debited  for  the  interact  The  interest  is  calculated  from  the  day  on  which 
the  bill  u  discounted  to  the  time  it  falls  due.  The  shortest  way  is  i» 
make  uee  of  an  interest  book  ;  hut  if  it  be  done  with  tin-  pen.  the  follow- 
ing rule  may  be  useful.  Multiply  tin-  amount  of  the  bill  by  the  numlx  r 
of  days.  To  the  product  add  our  thin!  of  itself,  one  tenth  of  that  third, 
and  one  tenth  of  that  tenth.  From  the  total  strike  off  four  figures  to  th. 
right  for  decimals.  This  will  give  the  interest  nt  5  per  cent,  in  pouinl> 
and  decimal  parts  of  a  pound.  The  decimals  are  to  be  brought  into 
•hillings  and  pence,  by  multiplying  by  twenty  and  twelve.  The  interest 
of  any  sum  at  a  different  rate  per  cent,  may  be  found  in  the  same  u.i\ . 
-,i  multiply  the  principal  by  twice  the  rate  of  interest,  and  strike  off 
fire  figures  for  decimals  instead  of  four. 

Rumple.  —  It  is  required  to  find  the  interest  of  £  500  for  ninety  days 
at  5  and  3J  percent. 

£  £ 

500  principal.  500  principal. 

90  number  of  d*y«.  7  twice  the  rate  of  interest 

1.3d          45,000  3,500 

1-IOth       15,000  90  number  of  d»rs. 

1-IOth        1,500  

150                                           l-3d  315,000 

l-10th  105,000 

l-10th  10,500 
1,050 


431550 
20 

3»«00  631000 

12 

—  £  «  3*.  3d.  at  5  per  cent.  

£  4  6*.  3d.  at  3i  per  cent  3-78000 

It  must  be  observed,  however,  that  this  method  of  calculation  is  not 
exactly  correct ;  it  produces  nearly  a  farthing  too  much  on  every  10/.  of 
•safest.  In  calculating  large  sums,  therefore,  the  amount  of  these  far- 
thngs  must  be  deducted. 

This  mode  of  calculation  is  founded  upon  the  rule,  that  whenever  you 
haye  to  divide  by  any  number  under  100,  you  may  divide  by  100;  after 
hatkg  added  to  the  dividend  such  a  proportion  of  itself  as  the  difference 
*****ei1  **  divisor  and  100  bears  to  the  divisor,  the  result  will  be  the 
same  as  though  you  had  divided  in  the  usual  way.  This  rule  is  best  ex- 
fbjinml  by  an  example. 

t  8tt*iAA*  3r°°  k**8  to  dlvi<Je  2'500  bX  4°-     Now  if  40  be  subtracted 
from  100,  there  will  remain  60.     The  proportion  which  60  bears  to  40  is 

•'         *f*  you  add  to  the  dividend  li  times  itself,  and  divide  by  100, 
yo«  have  the  quotient  required ;  thus  — 

1*1 


Banking  Calculations. 

2500 
2500 
1250 

62-50  Answer,  62  J. 

Now  then,  to  find  the  interest  upon  any  sum  for  one  day,  you  may  di- 
vide by  7,300,  or,  striking  off  the  ciphers,  by  73.  The  number  required 
to  make  up  100  is  27.  What  is  the  proportion  between  27  and  73  ?  If 
If  you  take  the  third  of  73,  a  tenth  of  that  third,  and  a  tenth  of  that  tenth, 
you  have  something  more  than  27.  And  if  you  add  to  73  one  third  of 
itself,  one  tenth  of  that  third,  and  one  tenth  of  that  tenth,  you  will  have 
lOOjJg,  which  divided  by  100  will  give  l^ceo-  As  the  proportion  is  not 
exact,  the  interest  given  by  the  above  rule  will  always  be  Mioeoth  part  too 
much,  which  is  about  a  farthing  in  every  £  10  interest. 

In  taking  the  interest  for  any  number  of  months,  it  will  be  useful  to  re- 
member that  the  interest  of  £  I  for  one  month  at  5  per  cent,  is  Id.  Thus 
the  interest  of  £  100  for  two  months  is  twice  a  hundred  pence,  or  16*.  Sd. 
The  interest  upon  shillings  and  pence  is  never  taken  into  the  account. 
If  the  fraction  is  more  than  10s.  it  is  regarded  as  £  1 ;  and  if  it  be  less, 
it  is  not  noticed. 

The  interest  for  any  number  of  months,  at  any  rate  per  cent.,  may  be 
found  by  multiplying  the  number  of  months  by  the  rate  of  interest :  with 
this  sum  divide  1,200.  By  this  quotient  divide  the  principal,  and  you 
have  the  interest  required. 

Example.  —  What  is  the  interest  of  £  10,000  at  4  per  cent,  for  three 
months?  4  multiplied  by  3  gives  12  —  divide  1,200  by  12,  and  you 
have  100 ;  then  divide  10,000  by  100,  and  you  have  £  100,  the  interest 
required. 

To  find  the  interest  of  any  sum  of  money  at  6  per  cent,  for  any  num- 
ber of  months.  This  and  the  subsequent  rules  may  be  found  illustrated 
in  Crossleifs  Intellectual  Calculator,  in  Fryers  Mental  Arithmetic,  and 
in  similar  works. 

Rule.  —  Multiply  the  number  of  pounds  by  the  number  of  months,  cut 
off  the  unit  figure,  and  the  remainder  is  the  answer  in  shillings.  The 
unit  figure  multiplied  by  l\  will  give  the  pence. 

Example.  —  What  is  the  interest  of  £  13,476  10s.  8d.  for  6  months 
at  6  per  cent,  per  annum  ? 

£      «.    d. 
13,476  10    8 

6  « 


20)  80,859     4     0 
404  •  5  •  10 

Having  obtained  the  interest  of  any  sum  at  6  per  cent.,  it  is  easy  to 
find  the  interest  at  H,  2,  3,  or  4  per  cent,  by  taking  ^,  £,  £,  or  §  the  in- 
terest, as  the  case  may  be. 

To  find  one  year's  interest  at  any  rate  per  cent. 

Rule.  —  Multiply  the  money  lent  by  double  the  rate  per  cent.,  reject 
the  unit  figure,  and  you  have  the  answer  in  shillings. 
p*  185 


•A  TVeo/iM  on  Banking. 

—  What  is  the  interest  of  £  27  105.  fur  one  year  at  3  per 

£    • 

a?  10 

6  double  the  interest. 

164     0 
IS 

60  Answer,  16*.  6<f. 

To  find  the  interest  of  any  sum  of  money  at  5  per  cent,  for  any  num- 
ber of  month*. 

.  — Take  the  pounds  as  pence,  and  multiply  by  the  months. 

—  What  is  the  interest  of  £120  at  5  per  cent,  for  8  months  ? 


$. 

ISO  pence  —  10 

8  number  of  months. 

£4    00        Answer. 

To  find  the  interest  of  any  number  of  days  at  5  per  cf  nt. 

Rule.  —  Multiply  the  days  by  one  third  of  the  pounds,  or  the  pounds 
by  one  third  of  the  days,  reject  the  unit  figure,  and  you  have  the  answer 
in  pence.  —  N.  B.  As  this  rule  is  founded  on  the  assumption  that  tin- 
year  consists  of  only  360  days,  you  must  deduct  one  penny  from  every 
six  shillings  of  interest 

Example.  —  What  is  the  interest  of  .£120  for  21  days  at  5  per  cent.  ? 

£130  Or  21  .lays. 

7  —  |  of  21  days.  40  =  J  of  the  pounds. 

12)  84,0  12)  84,0 

7  shillings.    Answer.  7  shillings.    Answer. 

There  is  often  a  difference  in  the  amount  of  interest  according  to  the 
method  of  calculation,  either  by  months  or  by  days.  A  month  from  the 
10th  of  February  to  the  10th  of  March,  is  only  28  days ;  but  from  the 
10th  of  March  to  the  10th  of  April,  a  month  is  31  days.  The  half  year 
from  the  1st  of  January  to  the  30th  of  June,  is  181  days  ;  but  from  the 
let  of  July  to  the  31st  of  December,  the  half  year  is  184  days.  Tl» 
interest  of  £  10,000  for  6  months  is  .£250  ;  for  181  days  it  is  only  £  247 
18*.  1  Id.  ;  for  184  days  it  is  £  252  Is.  Id.  Mr.  Reader  has  published  a 
•eric*  of  Time  Tables,  showing  the  number  of  days  from  every  day  in 
the  year  to  any  other  day  in  the  yen  r. 

Interact  tables,  calculated  at  any  rate  of  interest,  may  occasionally  be 
employed  to  ascertain  the  interest  on  any  sum  at  a  different  rate.  This 
»  done  by  taking  that  proportion  of  the  principal,  or  of  the  time,  which 
the  given  rate  of  interest  bears  to  the  rate  of  the  interest  tables.  For 
example,  if  it  be  necessary  to  ascertain  the  discount  on  a  bill  of  £  100 
for  50  days  at  4  per  cent.,  and  you  have  interest  tables  calculated  at 
5  per  cent,  you  may  take  either  four  fifths  of  th<-  time  or  four  fifths  of 
the  amount  For,  the  interest  of  £  100  for  40  days,  or  the  interest  of 


Banking  Calculations. 

£  80  for  50  days,  at  5  per  cent.,  is  equal  to  the  interest  of  £  100  for  50 
days  at  4  per  cent. 

When  a  bill  is  discounted,  bankers  charge  interest  on  the  full  amount 
of  the  bill,  and  take  it  at  the  time.  Thus,  if  a  bill  be  discounted  at  5  per 
cent.,  they  will  obtain  more  than  5  per  cent,  on  the  money  actually  ad- 
vanced. This  is  allowed  by  law,  and  is  not  liable  to  be  set  aside  on  the 
ground  of  usury.  Should  it  be  necessary  in  other  cases  to  allow  discount 
or  rebate,  the  mode  of  calculating  it  would  be  thus  :  — 

Example.  —  What  is  the  rebate  at  5  per  cent,  on  a  sum  to  be  received 
a  year  hence  ?  Then,  as  105  is  to  100,  so  is  100  to  the  sum  required. 


105  :  100  :  :  100         Answer  £  95.  4s. 
100 


105)  10,000  (95 
945 

550 
525 

25 
20 

105)  500  (4 
420 

80 
12 

105) 960  (  9£ 
945 

15 

When  you  have  to  find  the  interest  of  a  large  sum  for  one  day,  you 
may  strike  off  two  figures  from  the  right  hand,  and  take  the  interest  of 
the  remainder  for  100  days.  Thus,  if  you  have  to  find  the  interest  of 
.£47,863,47  for  one  day,  take  the  interest  of  .£47,863  for  100  days, 
then  take  the  interest  of  .£47  for  one  day,  and  add  the  two  sums 
together.  The  interest  of  £  1  for  100  days  is  the  same  as  the  interest 
of  £  100  for  one  day.  It  may  be  given  as  a  general  rule,  that  a  different 
time  and  sum  may  be  employed,  provided  they  yield  the  same  product 
when  multiplied  together.  Thus,  the  interest  of  £  10,000  for  one  day 
is  the  same  as  the  interest  of  £  1,000  for  10  days. 

Bankers  differ  in  their  mode  of  calculating  the  interest  upon  current  ac- 
counts. Some  have  an  Interest-Ledger,  or  cash  columns  ruled  in  the 
Current- Account-Ledger,  in  which  they  state  the  interest  upon  every  indi- 
vidual item  in  the  account.  Thus,  for  instance,  the  general  balance 
takes  place  the  30th  of  June,  and  the  3 1st  of  December.  If  a  sum  of 
money  is  paid  in  on  the  1st  of  May,  the  interest  is  calculated  on  that 
amount  from  the  1st  of  May  to  the  30th  of  June,  and  is  then  carried  to 
the  credit  of  the  party's  interest  account.  On  the  other  hand,  if  a  cheque 
be  drawn  on  the  1st  of  May,  the  interest  is  calculated  and  carried  to  the 
debit  of  the  interest  account.  On  the  30th  of  June,  the  interest  account 

187 


A  TVwriM  on  Banking. 

I,  and  the  balance  ia  carried  to  the  debit  or  credit  of  tin-  p 
account.  Other  bankers  take  off  the  balance  of  tin  rum-Mi  ,tr- 
into  a  separate  book  (or  hnvr  columns  ruled  in  tin-  ledger  IT  bring- 
ing oat  fee  bahnoet  [see  p.  158])  for  every  day,  from  tin-  1st  of  January 
tu  the  30th  "('  Juiii-  ;  ndd  all  these  amounts  together,  and  then  take  the 
interest  of  the  total  for  one  day  '!'••  take  tin-  interest  ii.r  .....  •  day  is  a 
*eiy  easy  operation.  The  interest  of  liny  sum  for  .me  \ear  at  f»  per  e.-m. 
ia  one  twentieth  part  of  the  principal,  and  the  interest  \»\-  one  day  is  the 
365th  part  of  the  intereat  for  a  year.  Now,  H(Jf>  multiplied  by  'M  gives 
7,300.  You  hare  then  only  to  divide  any  sum  by  7,:N)<),  SJMJ  you  have 
the  intereat  of  that  sum  for  one  day  at  5  per  cent,  per  annum.  The  in- 
terest of  any  sum  for  one  day  at  any  other  mte  than  5  per  cent,  may  be 
found  by  multiplying  the  principal  by  twice  the  rate  of  interest,  and  divid- 
ing the  product  by  7:1,000.  But  the  best  way  is  to  make  use  o.f  Gilmer's 
Interest  Tables,  published  by  Sims  &  M(  In  tyre,  of  Belfast.  Similar 
Tables  haw  also  been  published  by  Mr.  Coulthart,  manager  of  the  Ashton- 
uoder-Lyne  Joint-Stock  Bank. 

Banks  who  compound  for  the  stamp  duty  on  their  notes  and  twenty-one 
day  bills  on  London  calculate  the  sum  to  be  paid,  by  ascertaining  the 
amount  in  actual  circulation  every  Saturday  ni^ht.  The  amounts  for  all 
the  Saturdays  in  the  half  year  being  added  together,  and  divided  hy  26, 
the  number  of  weeks,  the  quotient  shows  the  average  amount  in  circula- 
tion during  that  period,  and  the  duty  paid  is  at  the  rate  of  3s.  (id.  per 
cent  upon  this  average  amount.  This  is  at  the  rate  of  7s.  per  cent,  upon 
the  average  annual  amount. 

To  ascertain  what  denomination  of  notes  remains  the  longest  in  circu- 
lation, let  the  total  average  circulation  for  any  given  period  be  represent- 
ed  by  the  number  1,000;  and  let  the  amount  of  each  particular  denomi- 
nation be  represented  by  a  proportionate  part  of  1  ,000.  Then  let  the 
total  amount  of  notes  paid  during  the  same  period  be  represented  by 
1,000,  and  the  amount  of  each  denomination  of  notes  be  proportionally 
ascertained  ;  then  place  these  two  series  of  numbers  in  juxta-positiun,  and 
it  will  immediately  be  seen  what  denomination  of  notes  remain  out  the 
longest  For  instance,  if  the  averai."'  amount  of  a  banker's  circulation 
consist  of  £20,000  in  £  5  notes  ;  £  15,000  in  £  10  notes  ;  £  10,000  in 
£20  notes;  and  £5,000  in  £50  notes,  then  the  proportionate  numbers 
will  stand  thus  :  — 

TouJ  Ctrtttteikn.  £5.  £10.  £90.  £  .vi. 

1,000  400  300  200  100 

Then,  if  during  the  same  period  the  amount  of  notes  paid  of  different 
denominations  have  been  £  15,000  in  £  5  notes  ;  £  15,000  in  £  10  notes  ; 
J.OOO  in  .£20  notes;  and  £8,000  in  £50  notes,  the  proportional 
numbers  will  stand  thus  :  — 


£8.  £]0.  £20.  £W>. 

900  300  240  160 

By  placing  these  numbers  under  the  preceding  ones,  it  will  be  per- 
J  that  the  amount  of  £5  notes  paid  is  less  than  the  proportional 
in  circulation  ;  and,  consequently,  notes  of  this  denomination  re- 

" 


Banking  Calculations. 


main  out  the  longest;  the  £  10  notes  remain  out  a  less  time;  the  ,£20 
a  still  shorter  term  ;  and  the  £  50  notes  the  shortest  term  of  all. 

To  ascertain  how  long  a  banker's  notes  remain  out,  take  the  average 
amount  in  circulation  for  any  given  period,  say  three  months ;  ascertain 
the  amount  of  notes  paid  during  that  period.  If  the  amount  paid  during 
the  three  months  is  twice  the  average  amount  in  circulation,  then  the 
notes  have  remained  out  six  weeks.  If  the  amount  paid  is  three  times  the 
amount  in  circulation,  then  the  notes  have  remained  out  one  month.  The 
term  which  any  particular  denomination  of  notes  remains  in  circulation 
can  of  course  be  ascertained  in  the  way  I  have  already  described.  These 
calculations  are  easily  made  by  a  table  of  logarithms. 

The  following  Account  shows  the  Average  Amount  of  Bank  of  England  Notes  in  Circula- 
tion, distinguishing  the  Denominations,  together  with  the  number  of  Days  the  Notes  re- 
mained out,  in  the  October  Quarter  1843,  1844,  1845,  1846,  and  1847  :  — 


October  Quarter, 

October  Quarter, 

October  Quarter, 

October  Quarter, 

October  Quarter, 

1813. 

1844. 

1345. 

1816. 

1847. 

Amount. 

Days. 

Amount. 

Days. 

Amount. 

Days. 

Amount. 

Days. 

Amount. 

Days. 

£ 

£ 

£ 

£ 

£ 

£5 

4,379,000 

83.0 

5,651,000 

86.3 

5,911,000 

77.8 

6.143,000 

80.6 

5,816,000 

74.0 

£10 

3,440,000 

91.3 

3,681,000 

91.4 

3,992,000 

78.3 

4^046,000 

79.5 

3,759,000 

73.6 

£20 

1,221,000 

67.4 

1,417,000 

66.7 

1,473,000 

58.6 

1,458,000 

58.9 

1,398,000 

G4.3 

£30 

3-:2,000 

23.2 

204,000 

23.0 

236.000 

21.1 

228,000 

20.8 

218,000 

19.3 

£40 

264,000 

17.4 

221,000 

17.2 

205,000 

15.5 

193,000 

15.0 

180,000 

13.3 

£50 

1,543,000 

46.2 

1,751,000 

48.5 

1,773,000 

39.8 

1,660,000 

40.1 

1,636,000 

37.0 

£100 

1,894,000 

34.9 

2,249,000 

31.1 

2,383,000 

29.0 

2,213.000 

27.1 

2,291,000 

26.2 

£200 

392,000 

14.8 

399.000 

14.4 

400,000 

12.9 

373,000 

12.3 

362,000 

10.9 

£300 

370,000 

12.2 

397,000 

12.4 

338,000 

10.8 

381.000 

10.8 

354,000 

9.0 

£500 

870,000 

14.1 

827,000 

13.8 

903,000 

12.1 

794,000 

12.0 

803,000 

10.3 

£1,000 

2,924,000 

12.2 

3,082,000 

10.3 

3,432,000 

10.1 

2,921,000 

8.9 

2,355,000 

7.3 

In  calculating  commissions  for  1  per  cent.,  divide  by  100 ;  for  ^  per 
cent.,  by  200  ;  for  \  per  cent.,  by  400  ;  for  £  per  cent.,  by  800. 

In  calculating  the  dividends  on  stock,  if  it  be  in  the  4  per  cents.,  the 
half  yearly  dividends  will  be  one  fiftieth  part  of  the  principal.  Hence, 
.multiply  by  2,  and  divide  by  100. 

If  the  stock  be  3  per  cents.,  the  half  yearly  dividend  will  be  ^g^ths  of 
the  principal.  Hence,  add  to  the  principal  one  half  of  itself,  and  divide 
by  100. 

If  the  stock  be  3|  per  cent.,  add  to  the  principal  one  half  and  one 
quarter  of  itself,  divide  by  100,  and  you  have  the  half-yearly  dividend. 

If  the  stock  be  3^  per  cent.,  add  to  the  principal  one  half  and  one 
eighth  of  itself,  divide  by  100,  and  you  have  the  half-yearly  dividend. 

Examples.  —  What  is  the  half-yearly  dividend  on  £  13,476  10s.  8d 
3  per  cents.,  3£  per  cents.,  3£  per  cents.,  and  4  per  cents.  ? 


3  PER  CENTS. 

£       s.    d. 

13,476  10     8 

6,738     5     4 

202.14  16     0 


3^  PER  CENTS. 

£  s.  d. 

13,476  10  8 

6,738  5  4 

1,684  11  4 

2J8.99     7     4 


189 


3i  PEE  CENTS. 
£          8.      d. 

13,476  10  8 
6,738  5  4 
3,369  2  8 

235.83  18     8 


4  PER  CENTS. 

£       s.    d. 

13,476  10     8 

2 

269.53     1     4 


A  Treatite  on  Banking. 

3  mm  cart*.  3J  raa  CBHTS.  31  I-KH  CKKTH. 
£       •    J                   JL        ,    .1  £       i.   d. 

XML  14    16     0  81899     7     4  835.83   18     8 
SO                                    SO  80 

1..  s:  16.78 

IS  IS  18 

II  51  1048  9.44  7.36 

£  i.  d. 

Antwer.  — 3   percent.        208  2  11 

31  per  cent        818  19  10 

3{  per  rent.         235  16  9 

4    percent        869  10  7 

In  making  calculations  respecting  the  purchase  or  sale  of  stock,  multiply 
the  amount  of  stock  by  the  price,  and  divide  by  100.  Stock-brokers 
have  seldom  any  occasion  to  make  these  calculations,  as  there  are  books 
published  expressly  for  their  use. 

To  compute  the  half-year's  dividend  on  any  amount  of  stock  in  tin- 
3  or  the  3|  per  cents.,  within  one  penny. 

Rmlf.  —  Multiply  the  amount  of  stock  by  3  or  3|,  respectively.  Take 
the  unit  of  the  pounds  produced  by  that  multiplication  for  penon,  ami  the 
remaining  figures  of  the  pounds  for  shillings.  But  when  the  unit  of  the 
pound*  produced  by  this  multiplication  is  more  than  4,  and  also  when 
there  are  shillings  or  pence  in  this  product,  then  on<>  penny  must  !><•  added 
to  the  result  for  the  unit,  and  one  penny  for  the  shilling  and  pen'-e. 

Example  1.  — What  is  the  half-yearly  dividend  on  £  13,476  10*.  8d. 
in  the  3  per  cents.  ? 

£      i.    d. 
13,476  10    8 

3     Multiply  by  3. 


20)4042.9  12     0 


SOS    8    9          Add  2</.  as  above.    £202  2*.  11</. 

Example  2.  —  What  is  the  half-yearly  dividend  on  £  13,476  10a.  Sd 
in  the  8|  per  cents.  ? 

£      i.    d. 

i      13,476  10    8 

3 


40,429  12    0 
3,369     8     8 

20)4379.8  14     8 
£21819     8          Add  &/.  as  above.     £218  19«.  lOrf. 

'  through  roe  hooks  a  purchase  of  Long  Annuities,  debit  thr. 
of  Long  Annuities  for  the  purchase  money.  Then  calculate 
how  much  per  annum  the  annuity  will  yield  upon  the  capital  invested, 
recollecting  that  the  annuity  will  expire  on  the  first  quarter  in  the  year 

190 


Banking  Calculations. 

1860.  Supposing  this  rate  to  be  4  per  cent.,  you  will,  when  the  annuity 
is  received  in  April  or  October,  debit  Long  Annuity  account  4  per  cent, 
interest  on  the  purchase  money,  and  credit  the  same  account  the  amount 
of  the  annuity  received.  The  first  entry  will  be  passed  to  the  credit  of 
Profit  and  Loss  Account.  The  second  entiy  will  be  passed  to  the  debit 
of  Cash  Account,  as  a  return  of  capital.  The  balance  of  the  Long  An- 
nuity account  after  each  entry  is  made,  will  show  the  amount  of  capital 
that  then  remains  invested  in  Long  Annuities. 

The  stock-brokers  charge  one  eighth  commission  on  all  purchases  and 
sales  of  stock  ;  one  shilling  per  cent,  on  Exchequer  Bills  and  India  Bonds 
The  charges  are  made  on  the  amount  of  stock,  not  on  the  amount  of 
money  invested.  In  the  purchases  or  sales  of  shares  in  public  companies, 
the  usual  charge  is  5*.  per  share.  In  continuation  accounts,  that  is, 
where  a  party  buys  stock  for  money  and  sells  it  for  time,  the  charge  is 
only  one  sixteenth  per  cent.  Upon  terminable  annuities,  the  charge  is 
one  eighth  per  cent,  upon  the  money  invested.  "  One  eighth  commis- 
sion "  is  a  charge  of  2s.  6d.  (the  one  eighth  of  a  pound  sterling)  on 
every  £  100 ;  a  quarter  commission  is,  of  course,  5s.  The  stock-broker 
usually  allows  the  London  banker  one  half  the  commission. 

If  the  stock  stands  in  the  name  of  several  persons,  any  one  may  re- 
ceive the  dividends,  but  they  must  unite  to  execute  a  sale.  If  one  or 
more  of  the  parties  die,  the  stock  is  transferred  by  the  survivors,  without 
the  concurrence  of  the  executors  or  representatives  of  the  deceased 
party.  Hence,  if  a  father  wished  to  give  his  son  a  certain  amount  of 
stock  at  his  death,  he  might  place  the  stock  in  his  own  and  in  his  son's 
name,  and  upon  his  death  his  son  would  become  the  actual  possessor  of 
the  property.  Powers  of  attorney  made  and  executed  for  the  sale  or 
transfer  of  stock  must  be  deposited  at  the  bank,  for  examination,  before 
two  o'clock,  the  day  previous  to  being  acted  upon ;  if  only  for  receiving 
dividends  upon  stock,  it  is  sufficient  to  present  the  power  of  attorney  at 
the  time  when  the  first  dividend  thereon  becomes  payable.  A  power  of 
attorney  costs  £  1  Is.  Qd. ;  but  for  Bank,  India,  and  South  Sea  Stock, 
£1  lls.Gd. 

EXPENSE  OF  A  TRANSFER  in                     £  £  s.  d.  £  £  s  d. 

BANK  STOCK,  not  exceeding     .    .    .  25  .   .  0  90  exceeding  25  .   .  0  1:2  0 

INDIA  STOCK,                           ...      10  .     1  10  0  10  .     1  14  0 

SOUTH  SEA  STOCK,     "        ...    .100  ..  0  9  6  100  ..  0  12  0 

The  dividends  on  the  3  per  Cent.  Consols  are  paid  in  January  and 
July.  The  dividends  on  the  3  per  Cent.  Reduced,  and  on  the  3|  per 
Cent.,  are  paid  in  April  and  October.  This  last  stock  bears  interest  at 
3£  per  cent,  only  till  October,  1854 ;  afterwards,  3  per  cent. ;  but  the  in- 
terest cannot  be  further  reduced  until  October,  1874. 

The  United  States  of  America  reckon  their  money  in  dollars.  To 
turn  dollars,  at  the  exchange  of  4s.  6d.  per  dollar,  into  pounds  sterling, 
multiply  the  number  of  dollars  by  9,  and  divide  by  40.  To  turn  pounds 
sterling  into  dollars,  multiply  by  40,  and  divide  by  9. 

The  French  calculate  their  stock,  not  by  the  amount  of  the  principal, 
but  by  the  amount  of  the  dividend.  Thus,  1,000  francs  in  the  French 

191 


money 
Fur  the 


A  Trralise  on  Banking. 

denote  1,000  franc*  per  annum.  To  calculate  the  purchase 
fcr  anv  amount  of  French  rentes,  first  ascertain  tin-  principal. 
Fur  the  5  per  Cents,  you  multiply  by  20,  imd  for  the  4J  p<  .  (Vnts.  by 
S*|  ;  for  the  4  per  Cents,  by  2S,  and  for  the  3  per  Cents,  l.y  :t:5  \  I  l.n 
ing  obtained  the  amount  of  stock,  and  tho  price,  pr.«---«-.l  in  tin-  same 
way  as  in  calculating  the  purchase  money  for  English  stock. 

foe  following  quotations  from  Waterston's  "  (  '.•inuiiTcial  Dictionary  " 
(.1  Cyclopedia  of  Commerce^  Mercantile  Laws,  Finance,  Commercial 
O^grmfky,  and  Navigation,  by  William  Watcrston,  Ksq.)  will  serve  to 
explain  the  operations  connected  with  foreign  bills  of  exchange  :  — 

•A  ibtslga  bill  of  exchange  U  an  order  addressed  to  a  person  residing  abroad.  di- 
m-ring him  to  pay  s  determinate  sum  of  foreign  money  to  the  person  in  who^-  favor  it 
!tm,  or  to  hit  order.  The  amount  of  foreign  money,  therefore.  «>  he  paid  U  fixed 
by  the  bill  ;  but  the  amount  of  British  money  (or  money  of  the  country  in  which  tin- 
drawer  rssidsi).  to  be  girta  for  the  purchase  of  tho  bill  is  by  no  means  fixed,  but  is 
eoatiaaally  varying. 

'..'ie  two  terms  of  comparison  lietweon  the  money  of  one  place  and  that  of 
another,  ooe  ie  fixed,  the  other  U  variable.  Tho  place  whose  money  is  reckoned  at  the 
fixed  price  it,  in  commercial  language,  said  to  receive  the  variable  price  :  the  other  in 
saidtofiw  the  variable  price.  Hence,  the  higher  the  i-x.-han_"-  between  nny  two 
pteess,  the  ssore  it  U  in  faror  of  that  which  receives  the  variable  pri--,-  :  the  lower,  til-- 
more in  Aivor  of  that  which  gives  tho  variable  price:  —  the  exchange  l..-iii;:  said  to  !-<• 
favorable  or  unfavorable  to  any  place,  according  as  a  smaller  or  larger  amount  of  the 
cansutij  of  that  place  U  required  for  discharging  a  given  amount  of  foreign  payment- 
Tbm  London  receives  from  Paris  a  variable  numl>cr  of  francs  and  centimes  f,>r  £  1 
Merliag;  sad  taking  the  par  at  25  francs  34  centimes  for  £  1,  exchange  will  be  5  per 
veai.  ia  mvor  of  London  when  it  rises  to  26  francs  62  centimes,  and  about  5  per  cent. 
again**  London  when  it  falls  to  24  francs  7  centime-. 

••  Bill  merchant*  stndy  the  exchanges,  not  only  between  the  place  at  which  they  re- 
sids  sad  all  other  places,  but  also  between  all  those  other  places  thcm--U  •  -.  l-y  which 
ateaas  they  ere  generally  enabled  to  realm;  a  profit  by  buying  hills  in  one  |>Ucc  ntxl 
wlliagthem  in  another;  —  in  this  way  preventing  SOY  great  fall  in  the  price  of  bilU  in 
tho«e  countries  in  which  the  supply  exceeds  the  d--m.m  I.  and  any  ^n-.u  ri-e  in  tho-.- 
MMintries  in  which  the  supply  happen*  to  Iw  deficient  Sometimex  ,-xehan_'e  opera- 
tkms  are  conducted  with  little  outlay  of  capital.  Thin,  if  a  bill  men-bant  in  London 
can  sell  a  bill  on  Amsterdam  at  half  percent,  premium,  and  buy  one  at  1'aris  at  half 

CceaL  discount,  and  with  the  Utter  buy  one  at  Paris  on  Amsterdam  at  par.  he  will 
«  gained  I  per  cent  bv  the  transaction,  without  the  employment  of  any  capital  ;  — 
the  bill  remitted  from  Paris  to  Amsterdam  arriving  in  time  to  meet  the  bill  drawn 
there  apon  hi*  correspondent.  Again,  a  bill  merchant,  in  order  to  take  advantage  of 
a  preatram  on  the  exchange,  may  obtain  a  credit  abroad  upon  which  he  may  draw 
bilk,  Bnder  the  calculation  that  at  some  future  and  not  very  distant  period  he  will  be 


•Me  to  replace  the  funds  at  a  lower  rate  of  exchange,  and  thereby  rcali/.e  a  profit  by 
the  opsrauoa.  The  central  point*  for  sii'-h  tran-u<-tioiu  are  Hamlnirgb.  Amsterdam. 
y*****  Paris,  Hew  York,  and  above  all,  London,  the  great  money  change  of  the 

»  • .     : 

'  In  thu  country  the  buying  and  selling  of  bills  on  foreign  countries  is  conducted  by 
^•y^sfl  saehttaaeaetions  centering  in  the  metropolis.     In  London,  the  days  for  tho 
"*stfoa  of  foreign  bill*  are  Tuesdays  and   Fridays,  the  /..;»'./«  /*«f  duijii.    The 
•  go  RHUtd  to  th<s  principal  merchants,  and  discover  whether  they  are  buyers  (,r 
J  sad  a  few  of  the  more  influential,  after  ascertaining  tho  state" of  the  market, 


Banking  Calculations. 

"  On  the  evenings  of  Tuesdays  and  Fridays,  the  market  rates  for  bills  on  all  the 
principal  foreign  cities,  with  the  current  prices  of  bullion,  are  published  in  WetenhalPs 
'  Course  of  the  Exchange.' " 

The  following  are  the  places  to  which  England  gives  a  certain  amount 
of  sterling  for  a  variable  amount  of  foreign  money  :  — 


Amsterdam 
Do. 
Rotterdam 
Antwerp 
Brussels     .        . 
Hamburgh     . 

£ 

.     short     1   ft 
.     3  months  1     ' 
.       do.       1 
do.       1 
.       do.       1 
do.       1 

Variable  according 
to  the  Exchanges. 

>r  12    4$  Florins  and  Stivers. 
'     12    7|                do. 
12    8                 do. 
'    26    5    Francs  and  Cents. 
•    26    5                  do. 
13  14i  Marcs  and  Schillings. 
25  75    Francs  and  Centimes. 
26    2                  do. 
26     5                  do. 
122    J     Batzen. 
10  11    Florins  and  Kreusers. 
10  12                 do. 
30  37    Lire  Tosc.  and  Cent. 
26     5    Lire  and  Ccntesimi. 

Do. 

Marseilles  .        . 
Frankfort 
Vienna 
Trieste   . 
Leghorn     . 
Genoa    . 

do.       1 
do.       1 
do.       1 
do        1 
do.       1 
do.       1 

The  following  are  the  places  to  which  England  gives  an  uncertain 
amount  of  sterling  for  a  fixed  amount  of  foreign  money  :  — 


Madrid 
Cadiz     . 
Naples       .        . 
Palermo         . 
Messina     . 
Lisbon 

Oporto       .        . 
Gibraltar        . 
Venice      .        .' 
St.  Petersburg 
Rio  Janeiro 
New  York 
Calcutta    . 

To  ascertain  the  amount  of  English  money  that  ought  to  be  received 
for  a  foreign  bill,  divide  the  amount  of  the  bill  by  the  rate  of  exchange. 
Thus,  suppose  the  following  bill,  for  300  francs,  were  negotiated  at  the 
rate  of  25  francs  65  cents  the  pound  sterling,  then  divide  300  by  25'65, 
and  the  result  will  be  the  amount  in  English  money. 

Londres,  le  18  Janvier,  1849.  B.  P.  F*-  300. 

Au  vingt  Fevrier  prochain  veuillez  payer  centre  ce  Mandat  a  Tordre  de   Messieurs 
,  la  somme  de  trois  cents  francs  valeur  en  compte  quc  vous 


Variable  according 

to  the  Exchanges. 

3  months    36    pence  for    1 

Dollar  of  Plate. 

do.         36|     " 

"        1 

do. 

do.         40       " 

"       1 

Ducat. 

do.       119i     " 

"       1 

Onza. 

do.       120      " 

1 

do. 

60  days/d  54       " 
do.         53  i     " 

1 

1 

Milreis. 
do. 

do.         48       " 

1 

Hard  Dollar. 

do.         47 

6  Lire  Austriachi. 

do.         38 

"       1 

Silver  Rouble. 

do.         30 

"       1 

Milreis. 

do.        47  i 

"       1 

United  States  Dollar. 

do.         23 

"       1 

Company's  Rupee. 

passerez  de  mime  avec  ou  sans  avis  de 
A  Messieurs  


Banquieri,  Paris. 
Q 


193 


A  Trtalitt  on  BatJnug. 

S*«S)«>000(  11 


4  m 


IfM 

M 

IMS  )  35700  (  IS 
MM 


15-65)28260(11 
2565 

•2610 


•  -45        Answer,  £11  13*.  llrf. 

We  mar  observe  that  all  bills  arc  drawn  in  the  money  of  the  country 
in  which  they  are  to  be  paid. 

In  the  cases  referred  to  in  the  third  paragraph  of  the  above  quotation, 
the  calculation  is  more  complicated.  To  ascertain  when  it  is  more  ad- 
TUntlgnoni  to  send  money  from  one  country  to  another  through  a  third 
country,  there  must  be  two  "  rule-of-three  "  calculations,  instead  of  one  ; 
and  if  the  number  of  countries  is  increased,  the  number  of  calculations 
will  be  increased.  But  these  calculations  may  be  abridged  by  what  is 
called  **  the  Chain  Rule,"  or  *'  Conjoined  Proportion,"  or  "  Compound 
Arbitration."  The  rule  given  by  arithmeticians  is  the  following :  — 
Place  the  numbers  alternately,  beginning  at  the  left  hand,  and  let  tin-  last 
number  stand  at  the  left  hand.  Then  multiply  the  first  row  continually 
for  a  dividend,  and  the  second  for  a  divisor. 

ErampU.  —  If  12  Ibs.  at  London  are  equal  to  lOlbs.  at  Amsterdam, 
and  100  Ibs.  at  Amsterdam  are  equal  to  120  Ibs.  at  Paris,  how  many  Ibs. 
at  London  are  equal  to  40  Ibs.  at  Paris  ? 


12—    10  12X100X40  =  48000 

100^120  10X120=1200)48000(40 

40  48000 


Answer,  40  Ibt . 

This  rale  is  capable  of  two  modifications.     The  example  we  have 
,is  when  it  is  required  to  find  how  many  of  the  first  sort  of  coin, 

or  measure,  mentioned  in  the  question,  are  equal  to  the  l.-i 
be  required  to  find  how  many  of  the  last  sort  of  coin,  weight  or 
measure  meotiooed  in  the  question,  arc  equal  to  the  quantity  of  the  first 
In  this  cane,  the  following  is  the 

—  Place  the  numbers  alternately,  beginning  at  the  left  hand,  and 
194 


Banking  Calculations. 

let  the  last  number  stand  on  the  right  hand.     Then  multiply  the  first  row 
for  a  divisor,  and  the  second  for  a  dividend. 

Example.  —  If  12  Ibs.  at  London  make  10  Ibs.  at  Amsterdam,  and 
100  Ibs.  at  Amsterdam  make  120 Ibs.  at  Paris,  how  many  Ibs.  at  Paris 
are  equal  to  40  Ibs.  at  London  ? 

Lea.  Right. 

12=  10  12  X  100     =1200 

100  =  120  10  X  120  X  40  =  48,000 

40  1200  )  48,000  (  40 

48,000 

The  above  examples  will  explain  the  principle  of  the  Chain  rule.  The 
following  example,  taken  from  Mr.  Waterston,  will  show  its  application 
with  regard  to  the  transmission  of  money. 

London  and  Paris,  through  Hamburgh.  —  Find  the  arbitrated  rate  be- 
tween London  and  Paris  when  the  exchange  of  London  on  Hamburgh  is 
13  marcs  12  schillings  banco  for  £  1  ;  and  that  of  Paris  on  Hamburgh 
184  francs  50  centimes,  for  100  marcs  banco. 

This  question  comes  under  the  second  branch  of  the  rule.  It  is  to  as- 
certain how  many  francs  will  be  obtained  for  £  1  sterling  when  sent  to 
Paris  by  way  of  Hamburgh ;  therefore, 

£  1  =  220  schillings  banco  =  13  marcs  16  schillings. 
Schillings  16  =  1  marc  banco. 

Marks  banco  100  =  18450  cents  =  184  francs  50  cents. 
Cents  100=1  franc. 

1  £ 
Then  1X16X100X100  —  160,000    divisor. 

220  X  1  X  18450  X  1  XI  =  4059.000     dividend. 
Answer,  25  francs  37  cents. 

It  will  be  seen  from  the  above  example,  that  on  the  right-hand  side  the 
marcs,  having  also  fractional  parts,  have  been  reduced  to  schillings,  and 
the  francs  to  cents  ;  and  hence  it  has  been  necessary  to  introduce  on  the 
left-hand,  the  number  of  schillings  in  a  marc,  and  the  number  of  cents  in 
a. franc  :  16—1,  and  100  =  1. 

Although  in  this  case  the  remittance  is  said  to  be  through  Hamburgh, 
yet  in  practice  the  operation  would  be  made  by  purchasing  in  London, 
bills  on  Hamburgh,  and  remitting  those  bills  to  Paris,  —  unless  bills  on 
Paris  direct  could  be  purchased  on  more  favorable  terms. 

The  calculations  which  refer  to  the  transmission  of  gold  from  one 
country  to  another,  are  very  important.  To  these  we  will  now  refer. 

In  England,  the  precious  metals  are  weighed  by  the  pound  Troy.  The 
following  is  the  table  :  — 

24  Grains        ....    make   1  Pennyweight. 
20  Pennyweights          .                 •        .1  Ounce. 
12  Ounces 1  Pound. 

Standard  gold  is  what  is  called  22  carats  fine  ;  that  is,  22  parts  of  pure 
gold  are  mixed  with  2  parts  of  alloy.  This  alloy  consists  chiefly,  we  be- 
lieve, of  copper.  Our  silver  coins  have  18  pennyweights  of  alloy  in  the 
pound. 

A  pound  weight  of  gold  is  coined  into  44J  guineas,  and  in  the  same 


A   Treatise  on  Banking. 
for  tovereigna.     An  ounce  of  standard  gold  is  worth  in  Great 


_  . 

.  43   17*.   10J</  :hr  twelfth  pnrt  of  £46   14*.  6</.,  the 

value  of  •  pound  w 

\  ,-,.mr<l  into  66  shillings;  and  in  the  same 

proportion  for  crowns,  hn!t"-.T..«n«.  :m-l  M\|»'imy  piece*. 

The  specific  gravity  of  gold   is   19-360  ;  that  is,  it  is   19,360   times 
heavier  than  distUled  water. 

The  specific  gravity  of  silver  is  10  17  1  ;  that  of  copper  is  8-878. 
\  cubic  foot  of  distilled  water  weighs    1,000  ounces,  or  62*5  pounds 
avoirdupois,  which  is  equal  to  75  95  pounds  troy. 
Avoirdupois  weight  is  as  follows  :  — 


16  Drarhmi        .        .        .        make 

Ounrc. 
I'miinl. 

28  round*           

Cjnarlt-r. 

4  Quarter*             .... 

20  Hundreds 

Hundred. 
Ton. 

One  Ib.  avoirdupois  is  equal  to  1  Ib.  2  oz.  11  dwts.  20  grs.  troy. 

A  pound  avoirdupois  is  to  a  pound  troy  as  1750  to  11  U). 

1  Ib.  avoirdupois  of  copper  is  coined  into  24  pence,  —  equal  to  .£240 
out  of  a  ton.  The  old  pennies  weighed  exactly  an  ounce  avoirdupois ;  so 
that  in  buying  an  ounce  of  any  commodity,  a  poor  man  might,  if  he 
thought  be  had  short  weight,  use  a  penny  piece  for  the  weight.  For  some 
jean  past,  the  penny  has  been  only  two-thirds  of  an  ounce. 

The  amount  of  gold  in  circulation  in  Great  Britain,  including  that  in 
the  Bank  of  England,  is  variously  estimated  at  from  44,000,000  to 
60,000,000  sterling.  The  silver  is  estimated  at  11,000,000,  but  that  in- 
cludes the  coin  in  the  colonies.  (Commons,  3,483-3,488.) 

We  often  find  in  the  City  Article  of  the  Times,  and  sometimes  in  the 
Morning  Chronicle  and  the  Economist,  paragraphs  like  the  following  :  — 

14  The  premium  on  gold  at  Paris  is  7  per  mille,  which,  at  the  English 
price  of  ^3  17*.  lOJrf.  per  ounce  for  standard  gold,  gives  an  ex- 
of 25-32  J ;  and  the  exchange  at  Paris  on  London,  at  short,  beiim 
it  follows  that  gold  is  0-30  per  cent,  dearer  in  Paris  than  in  Lon- 
don. 

By  advices  from  Hamburgh,  the  price  of  gold  is  435J  per  marc,  which, 
at  the  English  mint  price  of  £  3  17*.  lOjrf.  per  ounce  for  standard  p>M, 
gives  an  exchange  of  13- 10$  ;  and  the  exchange  at  Hamburgh  on  Lon- 
don, at  short,  being  13-10§,  it  follows  that  gold  is  0.17  percent,  dearer  in 
London  than  in  Hamburgh. 

The  course  of  exchange  at  New  York  on  London  is  108$  per  cent. ; 
and  the  par  of  exchange  between  England  and  America  being  109$  per 
cent,  it  follow*  that  the  exchange  is  1-08  per  cent,  against  England  ;  but 
the  quoted  exchange  at  New  York  being  for  bills  at  60  days'  sight,  the 
interact  must  be  deducted  from  the  above  difference." 

The  real  par  of  exchange  between  two  countries  is  that  by  which  an 
ounce  of  gold  in  one  country  can  be  replaced  by  an  ounce  of  gold  of 
equal  flneneat  in  die  other  country.  In  England,  gold  is  the  legal  tender, 
and  its  price  b  fixed  at  £  3  \*lt.  \Q\d.  per  ounce.  In  France,  silver  is 
the  currency,  and  gold,  like  other  commodities,  fluctuates  in  price  accord- 

196 


Banking  Calculations. 

ing  to  supply  and  demand.  Usually,  it  bears  a  premium  or  agio.  In  the 
above  quotation,  this  premium  is  stated  to  be  7  per  mille  ;  that  is,  it  would 
require  1,007  francs  in  silver  to  purphase  1,000  francs  in  gold.  At  this 
price  the  natural  exchange,  or  that  at  which  an  ounce  of  gold  in  England 
would  purchase  an  ounce  of  gold  in  France,  is  25.32  J.  But  the  commer- 
cial exchange  —  that  is,  the  price  at  which  bills  on  London  would  sell  on 
the  Paris  exchange  —  is  25  francs  25  cents,  showing  that  gold  is  0.30  per 
cent,  dearer  in  Paris  than  in  London.  Tables  have  been  constructed  to 
show  the  results  of  each  fluctuation  in  the  premium  of  gold  in  Paris.  In 
the  next  section  we  shall  insert  a  table  of  this  kind  with  reference  not 
only  to  Paris,  but  also  to  Hamburgh  and  to  Amsterdam. 

At  Hamburgh,  again,  the  exchange  is  the  other  way.  The  price  of  a 
mark  of  fine  gold  is  435 1  marcs  banco,  which  gives  an  exchange  of 
13.10^  marcs  and  schillings  against  the  pound  sterling.  But  the  commer- 
cial exchange  is  13.10|,  which  makes  a  difference  of  §  of  a  schilling; 
and  it  follows  that  gold  is  0.17  per  cent,  dearer  in  London  than  in  Ham- 
burgh. 

The  Money  Table  of  the  United  States  stands  thus :  — 

10  Mills       .       ,',.''.,      .        .        .        .    make    1  Cent. 

10  Cents          ..".-• 1  Dime. 

10  Dimes 1  Dollar. 

10  Dollars       .        .        .        .        .        .        .        .        .1  Eagle. 

The  following  regulations  were  adopted  in  the  year  1834  respecting 
gold  and  foreign  coins :  — 

"  Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United  States  of 
America,  in  Congress  assembled,  that  the  gold  coins  of  the  United  States  shall  con- 
tain the  following  quantities  of  metal ;  that  is  to  say,  each  eagle  shall  contain  232 
grains  fine  gold,  and  258  grains  standard  gold ;  each  half  eagle,  116  grains  fine  gold, 
and  129  grains  standard  gold  ;  each  quarter  eagle  shall  contain  58  grains  fine  gold, 
and  644  grains  standard  gold;  every  such  eagle  shall  be  of  the  value  of  10  dollars: 
every  such  half  eagle  shall  be  of  the  value  of  5  dollars  ;  and  every  such  quarter  eagle 
shall  be  of  the  value  of  2  dollars  and  50  cents;  and  the  said  gold  coins  shall  be 
receivable  in  all  payments,  when  of  such  weight,  according  to  their  said  respective 
values ;  and  when  of  less  than  such  weight,  at  less  values,  proportioned  to  their  re- 
spective actual  weights." 

"  Be  it  enacted,  &c.,  that  from  and  after  the  31st  day  of  July  next,  the  following 
gold  coins  shall  pass  current  as  money  within  the  United  States,  and  be  receivable  in 
all  payments,  by  weight,  for  the  payment  of  all  debts  and  demands,  at  the  rates  follow- 
ing ;  that  is  to  say,  the  gold  coins  of  Great  Britain,  Portugal,  and  Brazil,  of  not  less 
than  22  carats*  fine,  at  the  rate  of  94  cents  and  8-10ths  of  a  cent  per  pennyweight ;  the 
gold  coins  of  France,  9-10ths  fine,  at  the  rate  of  93  cents  and  l-10th  of  a  cent  per 
pennyweight ;  and  the  gold  coins  of  Spain,  Mexico,  and  Columbia,  of  the  fineness  of 
20  carats,  3  grains,  and  7-16ths  of  a  grain,  at  the  rate  of  89  cents  and  9-10ths  of  a 
cent  per  pennyweight.^ 

Under  the  above  Acts  of  Congress  the  English  sovereign  was  made  a 
legal  tender  at  the  rate  of  94-^  cents  per  pennyweight.  Hence,  the  full 
weight  of  the  sovereign  being  5  dwts.  3.274  grs.,  it  was  made  equivalent 
to  4  dollars  and  87  cents ;  or  487  dollars  equal  £  100.  But,  accord- 
ing to  a  rule  established  in  1789,  and  ever  since  retained  in  exchange 

*  This  is  the  usual  mode  of  expressing  the  fineness  of  gold.    The  ounce  is  divided 
into  24  carats.     If,  out  of  this  mass,  2,  3,  or  4  parts  out  of  the  24  consist  of  alloy,  the 
whole  is  said  to  be  22,  21,  or  20  carats  fine. 
Q*  197 


A  Trtatisf  on  Banking. 

operation*,  the  par  of  the  dollar  in  paid  at  4*.  6<f.  sterling,  which  gives  foi 
4*7  dollar*  Jf  109  lit  <;•/.  Tin-  nominal  par  thus  rvr.-ds  the  rral  |>;ir 
(|  1  I «  t. ;  .  ,,r  9f§  per  cent.  In  this  way,  when  the  exchange  is  nomi- 
nally 9f }  premium,  it  i*  really  at  par.  The  above  calculations  uro  sub- 
ject to  some  slight  modification!!  by  an  Act  of  Congress  fixing  the  amount 
of  alloy  in  both  the  gold  and  silver  coins  at  one  tenth  ;  but  commercially 
the  par  of  exchange  between  England  and  America  is  usually  quoted  as 
equal  to  109ft  P*r  <*»(• 

When  we  read  in  the  above  calculations  that  gold  is  so  much  d.-an-r  in 
one  country  than  the  other,  we  must  n«t  intVr  that  gold  can  therefore  be 
-%nt  thither  at  a  profit  We  must  take  into  account  the  expense  of  con- 
veyance. It  »  generally  considered  that  the  charges  and  loss  of  interest 
•mmdiip!  on  sending  gold  to  America,  do  not  amount  to  much  less  than 
3ft  percent 

Before  closing  this  subject,  we  will  make  some  remarks  on  our  ex- 
changes with  India.  It  has  l»-<-n  •^••••n,  that  with  this  country  we  give  an 
uncertain  amount  of  sterling  for  a  fixed  amount  of  foreign  money  ;  that  is, 
we  give  so  many  pence  (say  23  or  24)  for  a  rupee.  The  lower  the  ox- 
change,  that  is,  the  fewer  pence  we  give  for  the  rupee,  the  more  favorable 
is  the  exchange  for  England.  For,  the  lower  the  rate,  the  more  favorable 
is  the  exchange  to  that  country  in  whose  currency  the  rate  is  reckoned. 

The  following  is  the  Table  for  East  India  Money  :  — 

15  Piee make    1  Anna. 

16  Annas 1  Rupee. 

100,000  Rupees 1  Lac. 

100  Lacs 1  Crore. 

Taking  the  rupee  at  2*.,  a  crore  of  rupees  is  equal  to  £  1 ,000,000  ster- 
ling. A  lac  is,  of  course,  £  10,000.  The  figures  expressing  Indian 
money  are  not  easily  understood  by  Europeans.  The  capital  of  the  Bank 
of  Bombay  is  stated  at  52,25,000  rupees,  and  the  capital  of  the  Bank  of 
Bengal  at  1,10,13,580  „  1  „  7.  These  figures  should  be  respectively 
read  thus :  —  Fifty-two  lacs,  twenty-five  thousand  rupees ;  One  crore,  ten 
lacs,  thirteen  thousand  five  hundred  and  eighty  rupees,  one  anna,  and 
seven  pice. 

The  East  India  Company  in  London  issue  bills  on  India.  They  also 
discount  in  India,  bills  drawn  on  London,  taking  as  collateral  security  the 
bills  of  lading  and  the  policies  of  insurance  of  the  goods  against  which  the 
bills  are  drawn.  Their  advances  are  usually  to  the  extent  of  three  fourths, 
or  sometimes  three  fifths,  of  the  estimated  value  of  the  goods.  The  rate  of 
exchange  is  publicly  announced,  and  undergoes  modification  from  time  to 
time,  according  as  the  Company  may  have  occasion  to  accumulate  funds 
in  London  or  in  India.  (See  the  Evidence  of  W.  P.  Paton,  Esq.,  and 
J.  D.  Dickonson,  Esq.,  before  the  Committee  of  the  House  of  Commons, 
on  Commercial  Distress,  1848.) 

In  making  further  observations  upon  the  subject  of  this  section,  we  may 
observe,  that  there  is  often  a  great  facility  acquired  in  performing  arith- 
metical operations  by  varying  the  numbers,  and  especially  if  we  can  sub- 
stitute ten  or  a  hundred  for  some  other  number.  And  sometimes  we 

198 


Banking  Calculations. 

may  change  the  operation,  and  use  multiplication  for  addition,  or  the  re. 
verse.  Thus,  if  we  have  to  multiply  by  15,  we  can  multiply  by  10  by 
adding  a  cipher,  and  then  add  half  the  sum.  If  we  have  to  take  three 
fifths  of  a  number,  we  may  take  the  sixth  tenths.  Instead  of  dividing  by 
25,  we  may  multiply  by  4,  and  divide  by  100;  or,  instead  of  multiplyirg 
by' 25,  we  may  multiply  by  100  and  divide  by  4. 

To  calculate  the  interest  on  large  sums  at  any  rate  per  cent.,  it  is  usu- 
ally best  to  find  the  interest  at  1  per  cent,  (as  you  have  only  to  divide  by 
100),  and  then  multiply  by  the  rate  per  cent. 

It  is  useful  sometimes  to  know  how  many  persons  enter  a  bank  in  the 
course  of  a  day,  and  during  what  hours  the  greater  number  arrive.  To 
do  this,  set  a  person  in  the  hall,  with  a  paper  marked  9  to  10,  10  to  11, 
and  so  on.  Then,  when  a  person  enters  a  bank  between  the  hours  of  9 
and  10  o'clock,  he  will  make  a  mark  like  a  figure  1.  This  mark  he  will 
repeat  as  every  additional  person  enters.  He  will  go  on  in  this  way  all 
through  the  day.  When  the  bank  closes^  he  will  ascertain  by  counting 
the  marks  how  many  persons  have  entered  the  bank  during  each  hour, 
and  how  many  altogether.  The  cashiers  should  go  to  dinner  during  the 
hour  in  which  the  fewest  people  come  tb  the  counter.  And  if  a  clerk 
wants  a  day's  holiday  he  should  fix  on  the  day  on  which  the  fewest  people 
enter  the  bank.  It  is  in  this  way  that  a  man  standing  in  the  street  is  able 
to  keep  a  register  of  the  number  of  omnibuses  that  may  pass  him  during 
the  day. 

Occasionally  we  find  that  "  calculating  boys "  have  been  exhibited 
who  have  performed  arithmetical  operations  with  wonderful  rapidity.  In 
some  cases  they  have  explained  their  mode  of  doing  so.  It  would  appear 
that  they  have  in  their  mind  a  large  multiplication  table,  not  ending  at  12 
times  12,  but  extending  to  50  times  50,  or  100  times  100 ;  secondly,  they 
have  a  great  rapidity  of  finding  equivalent  numbers  by  which  the  ques- 
tions are  more  easily  worked ;  and  thirdly,  they  have  a  great  power  of 
memory,  by  which  they  can  carry  on  operations  in  their  mind  without 
committing  them  to  paper.  They  seemed  to  have  these  endowments  by 
nature ;  but  they  may  all,  in  a  degree,  be  acquired  bv  application.  A 
large  multiplication  table  may  be  learned  t»y  perseverance.  A  facility  of 
finding  equivalent  numbers  may  be  aquired  by  study  and  practice.  And 
even  arithmetical  operations  may  be  performed  by  the  memory.  Let  a 
person  try  to  work  a  sum  in  the  rule  of  three  in  this  way,  in  perfect  dark- 
ness, and  he  will  find  it  not  so  difficult  as  he  would  at  first  imagine.  But 
the  facilities  thus  acquired  by  application  would,  of  course,  be  vastly  infe- 
rior to  the  endowments  exhibited  by  these  "  calculating  boys."  It  is  re- 
markable that  these  boys  are  not  found  to  retain  this  wonderful  faculty 
after  they  are  grown  to  be  men. 

The  various  systems  of  artificial  memoiy  profess  to  teach  the  art  of 
remembering  figures.  This  is  done  by  turning  figures  into  letters,  and 
then  forming  a  word  from  those  letters,  or  by  associating  a  symbol  with 
the  number,  or  by  adding  the  letters  to  the  end  of  the  word.  Thus,  sup- 
pose the  floor  of  the  room  in  which  you  are  sitting  were  divided  into 
nine  compartments,  and  had  a  figure  and  letters  in  each  compartment ; 
thus :  — 

199 


A'  TVecfiM  on  Banking. 


I. 

s. 

9. 

B.C. 

D.F. 

Q    II 

4. 

ft. 

6. 

J.K. 

L. 

M.N. 

7. 

a. 

9. 

P.Q. 

R.  8. 

T.  V. 

Now,  if  you  wished  to  remember  the  number  29,  you  might  form  the 
"  foot,"  and  the  consonants  f  and  t  would  give  you  29.  If  you 
wished  to  recollect  86,  form  the  word  "  room."  So,  if  the  number  were 
58,  it  would  be  represented  by  the  word  "log."  The  word  "book" 
would  represent  17;  the  word  "paper,"  778;  and  "ledger,"  ;V. 
The  advantage  of  having  two  letters  to  one  figure  is,  that  you  can  more 
easily  form  words ;  for  if  one  letter  will  not  form  a  word,  the  other  may. 
Besidm,  if  you  should  forget  what  letter  represents  any  figure,  by  running 
over  the  alphabet  you  will  call  it  to  mind. 

We  have  supposed  these  numbers  and  figures  placed  on  the  floor. 
Now  stand  in  the  centre  of  the  room,  with  your  face  toward  the  window. 
Divide  the  wall  before  you  into  the  same  compartments  as  the  floor,  and 
place  over  the  wall  on  the  ceiling  the  number  10.  You  have  then  before 
you  all  the  numbers,  from  10  to  19  inclusive.  Divide  the  wall  on  your 
right  hand  in  the  same  way,  and  place  over  it  the  number  20.  Over  the 
wall  behind  you  place  30  ;  and  over  the  wall  at  your  left  hand  place  40 ; 
and  over  your  head  in  the  centre  of  the  ceiling  place  the  number  50. 
You  have  now  a  local  place  for  all  the  numbers,  from  1  to  50.  And  if 
you  wwh  at  any  \jrne  to  recollect  any  one  of  these  numbers,  your  mem- 
ory will  be  assisted  by  calling  to  mind  its  locality  in  this  room. 

You  may  go  further  than  this.  You  may  place  in  each  of  these  fifty 
squares  a  symbol ;  that  is,  the  figure  of  a  tree,  a  flower,  a  bird,  a  beast,  a 
fish,  or  any  thing  else.  For  instance:  —  In  the  compartments  on  the 
floor  you  may  place  trees,  the  name  of  each  tree  beginning  with  the  letter 
belonging  to  the  compartments.  The  compartments  from  10  to  20  may 
each  have  a  flower ;  from  20  to  30,  a  bird  ;  from  30  to  40,  n  beast ;  and 
from  40  to  50,  a  fish.  And  then,  if  you  wish  to  recollect  any  matter, 
you  may  form  some  fanciful  association  between  it  and  the  symbol. 

Dr.  Grey's  system  is  different  from  that  we  have  described.     He  rep- 
the  numerals  by  the  following  consonants  and  vowels  :  — 


8  4 

I  f 

i  o 


5  6 

1  • 

n          au 


890 
k  n  w 

ci          on  y 


Then,  to  recollect  a  date,  you  will  alter  the  termination  of  the  word,  and 

200 


Banking  Calculations. 

place  those  letters  that  correspond  with  the  figures.  Thus,  he  calls 
Alexander  the  Great,  Alexzta,  and  the  last  three  letters  show  that  he  died 
331  years  before  the  Christian  era.  Julius  Caesar  is  called  Julios,  showing 
that  he  died  46  years  before  the  same  period ;  and  Romput  shows  that 
Rome  was  founded  753  years  before  the  Christian  era. 

These  systems  of  artificial  memory  have  not  been  found  in  practice  to 
answer  the  eulogiums  of  their  professors.  Nevertheless,  they  are  occa- 
sionally useful  in  assisting  the  recollection  of  figures. 

The  following  questions  may  be  instructive  or  interesting  to  those 
young  men  who  may  be  disposed  to  work  them  :  — 

When  a  banker  discounts  bills  having  two,  three,  six,  nine,  and  twelve  months  to 
run,  charging  at  the  time  the  discount  of  4  per  cent.,  what  rate  of  interest  does  he  ob- 
tain on  the  money  actually  advanced  at  these  respective  dates  ? 

Suppose  a  banker  should  lend  £  100.000  consols  at  90,  from  the  1st  of  January  to 
the  13th  day  of  February,  at  l-16th  continuation,  and  should  part  with  the  money  at 
£  10,000  a  day  in  the  discount  of  bills  at  2£  per  cent,  all  of  which  bills  should  fall 
due,  in  equal  proportions,  on  the  10th,  llth,  and  12th  of  February,  what  would  he  gain 
by  the  transaction  ? 

If  a  banker  buy  consols  at  90  on  the  1st  of  December,  receive  the  half-yearly  divi- 
dend on  the  8th  of  January,  and  sell  the  consols  again  at  90  on  the  1st  of  February, 
what  interest  per  cent,  per  annum  does  he  receive  for  his  money  after  deducting  the 
income  tax  ? 

If  a  Long  Annuity  (which  expires  in  January,  1860)  is  bought  at  8<£  on  the  1st  day 
of  March,  1849,  what  rate  of  interest  does  it  yield  after  paying  the  income  tax  of 
sevenpence  in  the  pound  on  the  annuity? 

Suppose  there  were  thirty  clerks  in  a  bank,  the  junior  had  £80  per  annum  and  the 
senior  £  500.  and  they  increased  in  arithmetical  progression,  what  is  the  ratio  of  their 
increase,  and  what  is  the  total  amount  of  their  salaries  ? 

Suppose  you  were  asked  to  make  an  advance  on  a  lease  which  had  twenty  years  to 
run,  and  on  which  there  was  a  net  profit  rent  of  £  100  per  annum,  what  advance  would 
you  make  upon  it,  calculating  its  present  value  at  7  per  cent.,  and  taking  a  margin  of 
one  third  its  value  ? 

If  a  bank  which  has  £  20  paid  up  on  each  share,  pays  a  dividend  of  6  per  cent.,  how 
much  is  that  per  share  ? 

If  a  bank  gives  an  annual  bonus  of  7s.  per  share,  on  which  £  10  is  paid  up,  how 
much  is  that  per  cent,  per  annum  ? 

One  ounce  of  standard  gold  is  worth  £3  17s.  lO^d.  A  sovereign  is  worth  twenty 
shillings.  What  should  be  its  weight1? 

A  pound  weight  of  silver  is  coined  into  sixty-six  shillings.  What  are  the  respective 
weights  of  a  sixpenny-piece,  a  shilling,  and  a  half-crown  ? 

A  ton  weight  of  copper  avoirdupois  is  coined  into  £  240  in  penny-pieces  :  What  is 
the  weight  of  a  halfpenny-piece  ? 

What  is  the  weight  of  a  cubic  foot  of  gold,  and  into  how  many  sovereigns  may  it  be 
coined  ? 

What  is  the  weight  of  a  cubic  foot  of  silver,  and  into  how  many  shillings  may  it  be 
coined  1 

What  is  the  weight  of  a  cubic  foot  of  copper,  and  into  how  many  farthings  can  it  be 
coined  ? 

A  cubic  foot  of  gold  will  displace  a  cubic  foot  of  water,  but  how  much  water  would 
be  displaced  by  a  cube  of  silver  of  the  same  weight1? 

The  gold  that  came  to  Solomon  in  one  year  was  six  hundred  three  score  and  six 
talents.  Supposing  tfiis  to  be  pure  gold,  how  much  alloy  must  be  added  to  reduce  it 
to  standard  gold,  and  what  then  would  be  the  nnmtar  "of  talents  ?  —  Supposing  this 
standard  gold  to  be  taken  to  the  issue  department  of  the  Bank  of  England,  under  the 
Act  of  1844,  and  bank-notes  received  in  exchange  at  the  rate  of  £3  17s.  9e/.  per  ounce, 
what  amount  of  bank-notes  would  be  received,  taking  the  Hebrew  talent  as  equal  to 
113lbs.  10 oz.  1  dwt  lOgrs.  troy?  —  Supposing  payment  of  these  notes  should  after- 

201 


A  Trtatite  on  Banking. 

to  MfmifM,  which  are  coined  at  the  rate  of  £3  17..  104<f.  pet 
lM  total  wei 


oaace.  what  woafci  be  the  total  weight  of  these 

Had  the  arbitrated  rate  of  exchange  between  London  and  Amsterdam  VMS  the  ex- 
ehssfe  of  Loadoa  oa  Madrid  is  37  pence  for  one  dollar  of  plate,  and  that  of  Atmter- 
dam  os  Madrid  b  100  florins  75  cento,  for  40  ducat*  of  plate. 

Bar  gold  is  Loadoa  is  77«.  9d.  per  ounce  standard :  reqaired  the  arbitrated  rate  of 
exrsaage  prodaeed  by  iu  export  to  the  United  State*  for  coinage,  at  the  rate  of 
•U|  graiae  of  toe  gold  for  the  eagle  of  10  dollars. 

Bar  rirrar  ia  Loadoa  is  60  pence  per  ounce  standard;  in  Amsterdam  1044  tlm in- 
fer pood  toe;  reqaired  the  arbitrated  rate  of  exchange,  the  Netherlands  pond  bcin^ 
eqaal  to  1,000  wigtice,  and  31.1008  wigties  equal  to  one  ounce  troy.* 

If  ih«  pcwaiam  oa  gold  at  Paris  is  54  JHT  inillc,  mid  ilu- t-\(  lianco  at  Paris  on  Lon 
doo  b  tS  S?i,  how  mach  per  cent-  is  gold  dearer  in  Paris  than  in  Ix>ndon  '!  t 

If  the  price  of  gold  at  Hamburgh  U  435  per  marc,  and  tin-  cxi-lian^f  at  llamtuir^li 
oa  LBWJM  b  13-101,  how  much  per  cent,  is  gold  dearer  in  Iluinlmr^li  tlmn  in 


SECT.  XIV.  — BANKING  DOCUMENTS. 

Br  banking  documents,  I  mean  such  reports,  bonds,  deeds,  letters,  or 
other  writings,  as  an  and  in  connection  with  bunking. 

I.  I  shall  notice  those  Documents  that  are  used  in  the  formation  of  a 
Joint-stock  Bank. 

When  any  persons  propose  to  form  a  joint-stock  bank  in  any  district, 
they  procure  the  statistical  returns  of  the  district ;  such  as  the  tables  of 
the  population,  —  the  exports  and  imports,  —  the  duties  paid,  —  the  returns 
of  the  sales  in  the  various  markets,  —  and  every  other  information  re- 
specting the  trade  and  wealth  of  the  district.  If  these  prove  satisfactory, 
they  take  notice  of  the  banks  already  established  there,  and  observe 
whether  they  are  joint-stock  banks  or  private  banks,  —  whether  strong  or 
weak,  —  and  whether  likely  to  oppose  or  to  join  any  new  establishment. 
If  the  existing  banks  be  joint-stock  banks,  the  projectors  procure  from 
the  •I^TBp^fflK"  a  list  of  the  shareholders,  in  order  to  observe  the  strength 
of  their  proprietary,  and  whether  they  reside  chiefly  in  the  ilistri.-t. 

Having  satisfied  themselves  that  a  new  bank  would  be  successful,  the 
first  document  drawn  up  is  a  prospectus.  This  document  usually  sets 
forth  the  great  advantage  of  joint-stock  banking  to  both  the  public  and 
the  t>hareholdcrs,  and  then  points  out  the  facilities  of  the  district  in  which 
the  bank  is  proposed  to  be  established. 

Previous  to  issuing  the  prospectus,  some  leading  persons  in  the  district 
•re  requested  to  become  members  of  a  provisional  committee  for  the  for- 
mation of  the  bank,  and  they  obtain  the  assistance  of  an  influential 
solicitor,  to  whose  office  the  applications  for  shares  are  usually  addressed. 
The  committee  then  appoint  a  secretary,  or  sometimes  the  office  of  sec- 
retary b  filled  by  the  solicitor. 

*  The  last  three  qorstion*  are  taken  from  (Faferstofi't  Manual  of  Commerce,  where 
•  t  Sec  the  Table  No.  18,  in  the  next  section 


Banking  Documents. 

Attached  to  the  prospectus  is  the  form  of  an  application  for  shares, 
similar  to  the  following :  — 


BANKING  COMPANY. 


HEAD   BANK,. 


Capital,  £ in Shares,  of  £ each. 

APPLICATION  FOB  SHAKES. 
To  tJie  Provisional  Committee  of  the -  Banking  Company. 

GENTLEMEN, 

I  beg  to  apply  for shares  in  the  above  bank,  upon 

the  conditions  of  the  published  prospectus.    If  the  shares  be  granted,  my  utmost  in- 
fluence shall  be  exerted  in  support  of  this  bank. 
I  am, 

Yours  respectfully, 


Name 

Business  or  Profession 
.Residence       .... 

As  the  applications  come  in,  they  are  entered  in  a  book  prepared  for 
the  purpose.  In  the  first  column  is  entered  the  date  of  the  application ; 
then  follow  the  name,  profession,  and  residence  of  the  applicant ;  then 
the  number  of  shares  applied  for,  and  in  a  further  column  the  number  of 
shares  granted.  After  the  committee  have  determined  what  number  of 
shares  to  allot  to  each  applicant,  letters  are  addressed  to  the  respective 
parties  in  the  following  forms  :  — 

SIE, 

I  am  instructed  by  the  Provisional  Committee  of  the 

Banking  Company,  to  inform  you,  that  they  have  allotted  you shares  in 

the  Company ;  and  you  are  requested  to  pay  the  sum  of upon  each 

share,  to ,  where  you  will  receive  the  certificate. 

I  am,  Sir, 

Your  most  obedient  Servant, 

A.  B.  Secretary. 

SIR, 

Your  application  for in  the Banking: 

Company  has  been  laid  before  the  Provisional  Committee,  who  regret,  that  in  conse- 
quence of  the  numerous  applications,  they  are  unable  to  comply  with  your  request. 

I  am,  Sir, 

Your  obedient  Servant, 

A.  B.  Secretary. 

The  certificates  granted  upon  receipt  of  the  first  payment  on  the 
shares  are  different.  Some  use  the  following  form  :  — 

. BANKING  COMPANY. 


DEPOSIT  CERTIFICATE. 

No. 

18 

This  is  to  certify,  that  the  bearer  hereof  has  paid  the  sum  of  £  __ 
i>03 


A  TVMfwe  011  Banking. 


of  X. each,  allowed  to  him  in  the  capital  stock  of  the  above  Banking 

For  the  ProvWonal  Committee 

of  the  _^_______—  Banking  Company. 


Other  bank*  adopt  the  form  of  a  receipt,  thus :  — 


BANKING  COMPANY. 


Received  of  Mr on  account  of  the  aboro 

bank,  the  wm  of  £ being  the  deposit  of  __^_____  per  •hare  on 

afe  Wtof  admitted  a  holder  of  •hares. 

18 


AAcr  the  sums  have  been  received,  a  general  meeting  of  the  share- 
is  called  in  the  following  form  :  — 


-  BANKING  COMPANY. 

_  18 
Sim, 

I  am  instructed  by  the  Provisional  Committee  to  inform  you.  that  the 
first  general  meeting  of  the  shareholders  in  the  above  Banking  Company  will  be  held 
at  the  _  i_  on  _  .  next,  for  the 
parpoee  of  submitting  a  report  of  their  proof  nig  a  board  of  directors,  and 

Hiding  revolutions  for  the  immediate  constitution  of  the  Company. 
The  chair  will  be  taken  at  twelve  o'clock. 

Lett  you  should  be  unable  to  attend,  I  annex  a  form  of  proxy  for  voting,  the  blanks 
of  which  yon  most  fill  op  before  it  is  placed  in  the  hands  of  a  shareholder. 

I  am,  Sir, 

Your  obedient  Servant, 


PROXY  FOR  VOTING. 

BANKING  COMPANY. 


I,  the  undersigned,  a  shareholder  in  the  above  Banking  Company  for 

.  shares,  do  hereby  appoint also  a  shareholder 

fhardn,  to  vote  for  me,  and  on  my  behalf,  at  the  first  general  meeting  of  shareholders, 
to  be  held  ia on instant. 

Witness  my  hand  this day  of 18 

Name     . 


No.  of  shares. 


At  the  general  meeting  the  provisional  committee  make  a  report  of 
their  proceedings.  Resolutions  are  then  passed,  —  1.  That  the  report  be 
received  and  printed;  —  2.  That  certain  shareholders  then  named  be  ap- 
pointed directors  ;  —  3.  That  the  thanks  of  the  meeting  be  given  to  the 
provtctooal  committee.  The  bank  is  now  formed,  and  the  government  is 

204 


flanking  Documents. 

assumed  by  the  directors.  They  appoint  the  manager  and  other  officers ; 
they  prepare  the  deed  of  settlement ;  and  they  adopt  the  measures  ne- 
cessary for  the  commencement  of  business. 

II.  —  The  Deed  of  Settlement. 

This  is  the  deed  of  partnership,  which  must  be  signed  by  all  the  share- 
holders. It  fixes  the  name  of  the  bank,  —  the  places  where  business  is  to 
be  carried  on,  —  and  the  denomination  and  number  of  the  shares.  It 
regulates  the  appointment  of  directors,  —  the  qualifications  of  share- 
holders, —  and  the  mode  of  holding  meetings,  transferring  shares,  and 
making  dividends.  It  also  provides  for  the  winding  up  of  the  affairs  of 
the  bank,  in  case  it  should  not  be  successful.  So  many  joint-stock  banks 
have  printed  their  deeds  of  settlement,  that  any  new  bank  would  find  no 
difficulty  in  procuring  a  copy.  All  banks  now  introduce  a  clause,  pro- 
viding that  if  one  third  or  one  fourth  of  the  paid-up  capital  be  lost,  the 
bank  shall  be  dissolved  :  and  generally  there  is  a  clause  authorizing  any 
alteration  of  the  deed  by  two  successive  meetings  of  the  shareholders 
specially  summoned  for  that  purpose. 

III.  —  Bonds  of  Security  by  the  Officers. 
The  following  form  may  be  adopted  for  a  manager  :  — 

Know  all  men  by  these  presents,  that  we,  A.  B.  of  . C.  D. 

of E.  F.  of  and  G.  H.,  are  held  and  firmly  bound  to  W. 

X.  and  Y.  Z.  in  the  sum  of  five  thousand  pounds  of  lawful  money  of  Great  Britain,  to 
b6  paid  to  the  said  W-  X.  and  Y".  Z.  or  their  certain  attorney,  executors,  administra- 
tors or  assigns,  for  which  payment  to  be  well  and  truly  made,  we  bind  ourselves  and 
each  of  us,  and  any  three,  or  two  of  us,  and  our  and  each  of  our  heirs,  executors,  and 
administrators,  and  the  heirs,  executors,  and  administrators  of  any  three,  or  two  of  us 
jointly,  severally,  and  respectively,  firmly  by  these  presents.  Sealed  with  our  seals. 

Dated  this  day  of  .  in  the  year  of  our  Lord  one 

thousand  eight  hundred  and 

Whereas  the  above-bounden  A.  B.  has  been  appointed  chief  manager  of  a  certain 

public  joint-stock  banking  company,  called  the ,  of  ' 

which  company,  and  for  the  general  purposes  thereof,  the  above-named  W.  X.  and  Y. 
Z.  have  been  appointed  trustees.  And  it  was  agreed,  that  on  the  appointment  of  the 
said  to  be  such  manager  as  aforesaid,  he  should  with  sureties  enter  into  a  bond  to 
guarantee  his  fidelity  and  honest  conduct  while  in  the  service  of  the  said  company. 
And  whereas  each  of  them,  the  above  bounden  C.  Z).,  E.  F.,  and  G.  H.  has,  at  the 
request  of  the  said  A.  B.  agreed  to  become  surety  for  him  as  aforesaid  to  the  extent 
of  Jive  thousand  pounds :  Now  the  condition  of  the  above-written  bond  or  obligation 
is,  that  if  the  said  A.  B.  do  and  shall  from  time  to  time  while  he  shall  continue  in  the 
service  of  the  said  company  as  the  chief  manager  of  the  said  company,  diligently  and 
faithfully  serve  them,  and  devote  the  whole  of  his  time  and  attention  to  their  business, 
and  give  such  reasonable  attendance  at  their  banking-house,  as  the  directors  for  the 
time  being  of  the  said  company  shall  from  time  to  time  require,  and  do  and  shall  keep 
all  the  secrets  of  the  said  company,  and  inform  the  said  directors  of  the  company 
for  the  time  being  of  all  such  letters,  writings,  papers,  and  occurrences  whatever  as 
shall  from  time  to  time  come  to  his  knowledge  respecting  the  said  business, 
R  205 


Treatitt  on  Banking. 

• 

Bt4  6,  tad  ihtii  KMp  all  the  cash  accounts,  ledgers,  books,  deeds,  writings, 
an4  papers,  batoagiaf  «yr  nlarinf  to  the  said  concern  in  a  proper  and  business- 
like maaawr,  aad  regularly  answer  the  letters  of  their  correspondents,  and  do  and 
saafl  mke  das  cart  of  the  moneys,  securities  for  money,  and  property  belonging 
10  |jt«  nii  company,  or  placed  in  their  custody,  and  do  and  shall  from  time  to  iin»> 
iKTttr^l  far,  reader,  aad  make  over  to  the  directors  for  the  time  being  of  the  said 
rompanr,  all  sack  cash,  bills,  notes,  and  other  securities  as  shall  from  tnno  to 
tioM  corns,  or  without  his  wilful  default  might  have  come  to  his  hands,  and  shall  not 
embesak,  coaceal,  or  waitr,  nor  permit  (as  far  as  in  him  lies)  to  be  embezzled,  con- 
cealed, or  watted  by  others  any  of  the  property  of  the  said  company,  or  which  shall 
i  intrusted  to  their  care,  and  do  and  shall  receive  all  the  customers  of  thi- 
with  civility,  and  make  up  the  notes  or  memorandums  of  their 
r,  and  do  and  shall  as  far  as  in  him  lies  cause,  the  clerk 


or  ekrks  of  the  said  company  to  give  full  and  due  attendance  at  their  said  banking- 
hoase,  aad  there  to  conduct  and  demean  himself  or  themselves  diligently  and  faith- 
aad  hi  an  orderly  manner:  and  also  if  the  said  A.  B.  do  and  shall  in  all  other rc- 
dfligvntly.  skilfully,  and  faithfully  demean  and  conduct  himself  as  the  chief  man- 
ager of  the  said  company :  and  moreover,  if  they  the  said  C.  D.,  E.  F.t  and  G.  //.,  their 
baks,  exervtors,  or  administrators,  or  some  of  them,  shall  and  do  well  and  sufficient  I  y 
i  aad  keep  indemnified  .the  said  company  and  the  directors  and  all  other 
i  thereof  from  and  against  all  losses,  costs,  charges,  and  expenses  which  shall 
or  may  happen  or  come  to  them  for  or  by  reason  of  any  act,  deed,  matter  or  thing 
r,  wilfally  and  improperly  done,  or  wilfully  and  improperly  omitted  to  be 
>  by  the  said  A.  B.  in  or  during  the  said  sen-ice,  then  the  above-written  obligation 
be  raid,  bat  otherwise  the  same  shall  be  in  full  force.  Provided  always  and  it  is 
hereby  declared,  that  under  the  said  obligation,  the  said  C.  D.,  his  heirs, executors,  or 
administrators,  shall  not  be  liable  to  a  greater  sum  in  the  whole  than  two  thovtandjive 
•••&«/  pounds,  nor  the  said  E.  F.  his  heirs,  executors,  or  administrators  to  a  greater 
•am  in  the  whole  than  one  thoutami  five  hundred  pounds,  nor  the  said  G.  II.  bis  heirs, 
executors,  or  administrators  to  a  greater  sum  in  the  whole  than  one  thousand  pounds. 
As  witness  the  hands  and  seals  of  the  said  parties. 

The  following  is  the  form  for  a  clerk  :  — 

Know  all  men  by  these  presents,  that  A.  B.,  C.  D.,  and  E.  F.,  are  held  and  firmly 
boand  to  M'.  X.  and  y.  Z.,  in  the  penal  sum  of  one  thautand  pounds  of  lawful  money 
of  Great  Britain,  to  be  paid  to  the  said  W.  X.  and  Y.  Z.,  or  their  certain  attorney,  ex- 
afjsjort,  administrators,  or  assigns,  for  which  payment  to  be  well  and  truly  made,  we 
biad  Mrselres  and  each  of  us,  and  our  and  each  of  our  heirs,  executors,  and  adminis- 
trator*, and  the  heirs,  executor*,  and  administrators  of  any  three  or  two  of  us  jointly, 
atvsnlly,  sad  respecthrely  firmly  bylhese  presents.  Sealed  with  our  seals.  Date'd 
thi«  

Whereas  the  above  boonden  A.  B.  has  been  appointed  a  clerk  in  a  certain  public 

c**»P**7»  called  |he t  of  which  company  and  for  the  gen- 

eral  pwposes  thereof  the  above-named  W.  X.  and  Y.  Z.  have  been  appointed  trustees. 
Aad  it  *•*  agreed  that  on  the  appointment  of  the  said  A.  B.  he  should  with  sureties 
••*•*  !*•  *  DO°4  to  guarantee  his  fidelity  and  honest  conduct.  /  And  whereas  the 
•hove  bosokden  C.  D.  and  E.  F.  have  at  the  request  of  the  said  A.  B.  agreed  to  become 
ewstj  far  USB  M  aforesaid  to  the  extent  of  five  hundred  pounds  each.  Now  the  con- 
dWosM  of  the  above-written  obligation  is,  that  if  the  said  A.  B  do  and  shall,  while  he 
•ml  CSsjmwM  ia  the  service  of  the  said  company  as  such  clerk,  diligently  and  faith- 


Banking  Documents. 


fully  serve  them,  and  devote  the  whole  of  his  time  and  attention  to  their  business,  and 
give  such  reasonable  attendance  at  their  office,  as  the  directors'  or  manager  for  the  time 
being  of  the  said  company  shall  from  time  to  time  require  ;  and  do  and  shall  keep  all 
the  secrets  of  the  said  company,  and  inform  the  directors  of  the  said  company  for  the 
time  being  of  all  such  letters,  writings,  papers,  and  occurrences  whatsoever,  as  shall 
from  time  to  time  come  to  his  knowledge  respecting  the  said  business  ;  and  do  and 
shall  from  time  to  time  account  for  and  make  over  to  the  directors  or  manager  for  the 
rime  being  all  such  cash,  bills,  notes,  and  other  securities  as  shall  from  time  to  time 
come  or  without  his  wilful  default  might  have  come  to  his  hands,  and  shall  not  em- 
bezzle, conceal,  or  waste,  nor  permit  (as  far  as  in  him  lies)  to  be  embezzled,  concealed, 
or  wasted  by  others,  any  of  the  property  of  the  said  company,  or  which  shall  have 
been  intrusted  to  their  care.  And  also  if  the  said  A.  B.  do  and  shall  in  all  other 
respects  diligently,  skilfully,  and  faithfully  demean  and  conduct  himself  as  such  clerk 
of  the  said  company.  And  moreover,  if  they  the  said  C.  D.  and  E.  F.,  their  heirs, 
executors,  and  administrators,  or  some  of  them  shall  and  do  well  and  sufficiently  save 
harmless  and  keep  indemnified  the  said  company  and  the  directors  and  all  other  mem- 
bers thereof  from  and  against  all  losses,  costs,  charges,  damages,  and  expenses,  which 
shall  or  may  happen  or  come  to  them  for  or  by  reason  of  any  act,  matter,  or  thing 
whatsoever  wilfully  and  improperly  done,  or  wilfully  and  improperly  omitted  to  be 
done  by  the  said  A.'B.  in  or  during  the  said  service,  then  the  above-written  obligation 
shall  be  void,  otherwise  the  same  shall  be  in  full  force.  Provided  always,  and  it  is 
hereby  declared,  that  under  the  said  obligation  the  said  C.  D.,  his  heirs,  executors, 
or  administrators,  shall  not  be  liable  to  a  greater  sum  in  the  whole  than  Jive  hundred 
pounds ;  nor  the  said  E.  F.  his  heirs,  executors,  or  administrators,  to  a  greater  snm 
in  the  whole  than  Jive  hundred  pounds.  As  witness  the  hands  and  seals  of  the  said 
parties.  . 

IV.  —  Declarations  of  Secrecy. 

The  following  is  the  form  for  the  directors  and  trustees  :  — 

We,  the  undersigned  persons,  being  respectively  the  directors  and  honorary  direct- 
ors, and  trustees  of  the  public  Joint-stock  Company  called .. 

do  severally  declare  that  we  will  respectively,  faithfully,  and  impartially  discharge  the 
several  duties  devolving  on  us  as  such  directors  as  aforesaid,  according  to  the  deed  of 

settlement  of  the  company,  bearing  date  the day  of , 

and  any  laws  and  regulations  that  may  be  made  in  pursuance  thereof.  And  we  do 
hereby  pledge  ourselves,  and  as  inviolably  as  if  we  had  taken  our  oaths  thereto,  that 
we  will  observe  the  strictest  secrecy  on  the  subject  of  all  transactions  of  every  descrip- 
tion of  the  company,  with  their  customers  for  the  time  being,  or  with  any  other  bodies 
or  persons  whatsoever,  and  on  the  subject  of  the  accounts  of  all  bodies  and  individuals 

from  time  to  time  having  accounts  with  the  said  company.    Dated  this 

day  of ,  18 

The  following  is  the  form  for  the  officers :  — 

Declaration  of  Secrecy  by  the  Managers  and  Clerks. 

We,  the  undersigned  persons,  being  respectively  managers,  accountants,  cashiers, 
tellers,  and  clerks  of  the Banking  Company,  do  severally  de- 
clare, that  we  will  respectively,  faithfully,  honestly,  and  impartially  discharge  the  sev- 
eral duties  devolving  on  us  as  such  managers,  accountants,  cashiers,  tellers,  and  clerks 

207 


A  Trcatiif  on  Banking. 

,  BKOrdJBg  to  the  directions  of  the  directors  of  the  company,  and  any  laws 
thai  may  be  made  by  them  And  we  do  hereby  severally  pledge  our- 
IVB*  BBrf  as  mviobhiy  a*  if  we  had  taken  our  oaths  thereto,  that  we  will  observe  the 
•crkMM  secnqr  OB  UM  SBhject  of  all  transactions  of  every  description  of  the  company 
win  ttVir  CMMMTS  for  Ike  *M  being,  or  with  any  other  bodies  or  persons  whatso- 
r.  aad  OB  UM  subject  of  the  state  of  the  accounts  of  all  bodies  and  individuals  from 

i  to  time  baviBf  aeoomnu  with  the  said  company.    Dated  this  __ day 

-*  ,«« , 

V.  —  Letter*  of  Guarantee? 
WM  rrfemct  to  Advance*  or  to  Bill*  Discounted. 

Rill-brokers  usually  give  a  letter  of  guarantee,  instead  of  indorsing  the 
bOb  they  hare  discounted  with  the  bankers.  And  sometimes  one  party 
will  guarantee  to  the  bank  the  bills  discounted  for  another. 

(1.) 
n  tit  Directors  of  0* Banking  Company. 

IB  consideration  of  your  paying  the  cheques  of  Mr. ,  or 

,  otherwise  advancing  him  sums  of  money,  I  hereby  guarantee  the  repayment  thereof 
upon  demand,  to  the  extent  of  one  thousand  pounds. 

I  am,  &c. 

(2.) 
To  At  Dincton  of  the Banting  Company. 

GKVTUMBJI, 

In  consideration  of  yonr  discounting  a  bill  for  £ ,  drawn  by  A.  B. 

or  C  D.  dated ,  at months,  I  hereby  guarantee  the  due  pay- 

neat  of  the  same  at  maturity. 

I  am,  &c. 

(3.) 
GnrrunEw, 

IB  consideration  of  yonr  discounting  the  alwve  bills,  I  hereby  guarantee 
lha  pBBeftul  payment  thereof  as  they  respectively  fall  due. 

I  am,  &c. 

(4-) 
VsWrunm, 

Mr.  M»  STsjufcr  may  have  occasion  to  offer  you  sundry  bills  for  discount 
la  OMtUeratioa  of  yoar  discounting  such  of  them  as  you  approve  of,  which  I  request 
JOB  to  do,  I  hereby  guarantee  the  punctual  payment  of  such  bills  when  due. 

I  am,  &c. 


remarks  on  this  subject,  as  well  as  on  other  matters  con- 
•  ta  "  CVyfan  on  CbuMtry  UanL-iny,"  by  J.  II.  Rogers, 
(fc.  n  Usoo,  pvfeUtber.) 


Banking  Documents. 

VI.  —  A  Form  of  Letter, 

To  be  signed  by  a  Party  lodging  Deeds  or  oilier  Documents  as  Security  for  Advances  of 

Money. 

(1-) 
To  the  Directors  of  the Banking  Company. 

GENTLEMEN, 

I  have  sent  you  the  title  deeds,  and  other  writings,  relating  to  my  several 

freehold  and  copyhold  estates  and  properties,  in  or  near ,  in  the 

county  of ,and  which  documents  I  hereby  declare  are  deposited  with 

you,  as  a  security  for  all  sums  of  money  now  or  hereafter  to  become  due  from  me, 
either  solely,  or  jointly  with  others,  to  the  said  banking  company,  either  upon  banking 
account,  or  in  any  other  manner  howsoever  (including  interest,  commission,  and  all 
other  usual  banking  charges) ;  and  I  hereby  engage,  upon  request,  to  execute  to  you, 
or  to  the  trustees  of  the  said  company,  a  mortgage  of  the  said  tenements  and  premi- 
ses, for  the  better  securing  the  said  sum  or  sums  of  money,  intended  to  be  hereby  se- 
cured, such  mortgage  to  contain  a  power  of  sale,  and  all  other  usual  covenants,  and  to 
be  at  my  expense. 

I  am,  &c. 

(2.) 
GENTLEMEN, 

Having  this  day  borrowed  of  you  £ ,  upon  a  deposit  of  the  under- 
mentioned securities,  which  sum  is  to  be  repaid  to  you,  with  interest  at  _^ per 

cent  per  annum,  on  the next,  I  hereby  authorize  you,  in 

case  the  said  sum  of  £ shall  not  be  repaid  as  aforesaid,  to  sell  the  said  securi- 
ties, or  any  part  thereof,  whenever  you  may  think  proper  so  to  do,  and  repay  your- 
selves the  sum  of  £ and  interest,  returning  to  me  the  surplus  (if  any),  or  hold- 
ing it  for  my  account ;  and  in  the  event  of  any  deficiency,  I  hold  myself  responsible  to 
you  and  the  survivors  of  you  for  the  same. 

I  am,  &c. 

(3.)    . 
GENTLEMEN, 

In  consideration  of  the  loans,  advances,  or  discounts  which  may  be  made 
to  me,  or  upon  my  request  by  you,  I  hereby  charge  all  or  any  title  deeds  or  other  prop- 
erty belonging  to  me,  which!  may  place  or  leave  in  your  hands,  with  the  repayment 
of  all  such  loans,  advances,  or  discounted  bills,  together  with  all  costs,  interest,  and 
charges  thereon ;  and  I  hereby  undertake  to  make  an  assignment  by  way  of  mortgage, 
with  power  of  sale,  whenever  called  upon  so  to  do,  of  the  property  which  I  may  or 
shall  be  entitled  to  under  such  title  deeds. 

I  am,  &c. 

VII.  —  Memorandum  of  Agreement  with  reference  to  the  Lodgment  of 

Deeds. 

MEMORANDUM,  that  on  the day  of          ' ,  in  the  year  of  our 

Lord  one  thousand  eight  hundred  and  forty- , 

hath  delivered  to ,  at  their  office  in _, 

in  the  county  of ,  the  several  title  deeds  and  documents  men- 
tioned and  comprised  in  the  schedule  hereunto  annexed,  for  the  purpose  of  securing  to 
R*  209 


A  TVeaJiw  on  Banking. 

the  proprietors  »  the  said  hankinc  company  for  the  time  being,  of  whomsoever  the 
•MM  haakiajt  company  may  from  time  to  time  con«i»t,  all  and  every  sum  and  sum* 


at  any  time  hrrcarsV  ba  due  or  owing  from 
,  OB  the  balance  of  hi*  account  current  with  the  said  banking  com- 
fhr  moaey  paid  or  advanced,  or  to  be  paid  or  advanced,  by  the  said  bank- 
aaid  .  or  at  his  request,  or 

by  any  bond  or  bill  of  exchange  drawn  or  endorsed  by  the  said 
or  by  any  promissory  note  or  other  contract 


whatsoever,  win.  tartmat  for  the  same  respectively,  from  the  several  times  at  which 
toy  respectively  •ball  be  advanced,  or  at  which  the  said  bonds,  bills,  notes,  or  other 
contract*  respectively  thall  become  due,  and  thenceforth  until  payment  thereof  respec- 
tively after  the  rale  of per  centum  per  annum,  with  commission  and  other 

•Mai  beaker's  caatfM,  so  as  the  same  do  not  exceed  in  the  whole  the  sum  of 

£. . 

Aad  the  said doth  hereby  promise  and  agree 

wfeh  aad  to  m«  said  banking  company  that  he  the  said , 

whaaavcr  tibimfftfr  reqaired  by  the  said  banking  company,  shall  and  will  effectually 
eoavey  aad  aware  all  and  singular  the  hereditaments  and  premises  comprised  in  the 
aaid  deeds  aad  writings  onto  and  to  the  use  of  the  said  banking  company,  in  such 
saaaaer  M  shall  be  lawfully  required  by  them,  free  from  incnmbrance* ;  subject,  never- 

theteaa,  to  redemption  on  payment  by  the  said 

of  Mrh  sam  of  money  M  shall  be  therein  expressed  to  be  secured  with  interest  in 
And  in  the  said  indenture  of  mortgage  shall  be  contained  all  usual 
I  covenants,  with  power  of  sale  in  case  default  shall  be  made  in  payment  of 
the  principal  aad  interest  to  be  thereby  secured,  or  any  part  thereof.  As  witness  the 
I  of  the  aaid  ^__ ,  the  day  and  year  first  above 

(The  tchfdule  above  rtfemd  to.) 

VIII.  —  Cash  Credit  Bond. 

Almoat  every  bank  that  grants  cash  credits  has  its  own  form  of  bond. 
I  think  the  following  as  good  as  any  that  I  have  seen :  — 

Know  all  men  by  these  presents,  that  we,  A.  B^  of ,  C.  D^  of 

i  aad  E.  F.t  of ,  are  jointly  and  severally  held 

o  W.  X.  of ,  and  Y.  Z.  of , 

of  the  society  or  co-partnership  called  the 


of  pounds  of  lawful  money  of  Great  Britain  and  Ire- 

P**d  to  the  Mid  F.  G.  and  H.  /.,  or  their  certain  attorneys,  executors,  ad- 
s,  aad  aa"gna,  'or  wbich  payment,  to  be  well  and  truly  made,  we  bind  onr- 
a»t»««,  aad  aaeh  aad  every  of  us,  and  onr,  and  each  and  every  of  our  heirs,  executor*, 
aad  adminUtratora,  jointly,  severally,  and  firmly  by  these  present*.     Sealed  with  onr 
•*»!•.    Daicdthtt  _  of 


_  _  . 

'••***  *•*  *^°Tl»^o«"d  A.  B.  hat  opened  an  account  with  the  above-mentioned 
mtg<^h  OJi>i  tha^  -  .  _  ,  at  their 
...  -  .  --   ,  and  is  desirous  of  being  accommodated 

r  ••  MM  aaeiatj  or  eo  pailMiship,  from  time  to  time,  in  some  one  or  other  of  the 
1  ™  w*»*fc  ™*ka«  are  in  the  habit  of  affording  accommodation,  ami  to 
aooety  or  co-partnrnhip  to  take  the  said  account,  and  to  accommodate 


Banking  Documents, 

him  from  time  to  time,  in  some  one  or  other  of  the  modes  aforesaid,  the  said  A.  B.  and 
the  said  C.  D.  and  E.  F.  as  his  sureties,  have  agreed  to  enter  info  the  above-written 
bond  or  obligation  with  such  conditions  as  hereinafter  is  expressed. 

Now  the  condition  of  the  above-written  bond  or  obligation  is  such,  that  if  the  said  A.  Z?., 
C.  D.,  and  E.  f.,  or  some  or  one  of  them,  or  their,  or  some  or  one  of  their  heirs,  exe- 
cutors, or  administrators,  do  and  shall,  on  the  demand  in  writing,  under  thb  hand  of 

any  one  of  the  public  officers  of  the  said  society  or  co-partnership,  called 

,,  well  and  truly  pay  or  cause  to  be  paid  to  the  said  society  or  co- 
partnership, all  and  every  such  sum  and  sums  of  money  as  upon  the  balance  of  any 
account  current,  which  now  is,  or  at  any  time  or  times  hereafter  shall  be  open  between 
the  said  A.  B.  and  the  said  society  or  co-partnership,  shall  or  may,  from  time  to  time, 
be  due  and  owing  from  or  by  the  said  A.  B.,  his  executors,  or  administrators,  together 
with  all  discount,  interest,  postage  of  letters,  and  commission,  according  to  the  usage 
and  course  of  business,  but  nevertheless  to  the  extent  only  of  £ prin- 
cipal money,  exclusive  of  interest  and  costs,  in  case  such  balance  shall  exceed  the  sum ; 
and  so  that  the  above-written  bond  or  obligation  shall,  and  may  be,  a  continuing  secu- 
rity to  the  said  society  or  co-partnership  to  the  amount  of  £> prin- 
cipal money,  besides  such  interest  and  costs  as  aforesaid,  notwithstanding  any  settle- 
ment of  account,  or  other  matter  or  thing  whatsoever,  then  the  above-written  bond  or 
obligation  shall  be  void ;  otherwise,  the  same  shall  remain  in  full  force  and  virtue. 

Signed,  sealed,  and  delivered 

in  presence  of . 

The  following  is  the  form  of  cash  credit  bond  used  by  one  of  the 
banks  in  Scotland.  It  will  be  seen  that  the  latter  part  has  a  reference 
to  the  peculiar  law  of  Scotland,  and  hence  it  is  not  adapted  for  the  use 
of  banks  established  in  England  :  — 

We,  A.  B.,  C.  D.,  and  E.  F.,  considering  that  the  directors  of  the  banking  company, 

established  in  Edinburgh,  under  the  title  of  the , 

have  agreed  to  allow  us  credit  upon  a  current  account,  to  be  kept  in  the  name  of  the 

said  A.  B.,  in  the  books  of  the  said  bank  at  its  branch  office  in , 

or  at  such  other  office  or  offices  of  the  said  bank  as  the  directors  thereof  may  from  time 

to  time  appoint,  to  the  extent  of pounds  sterling,  upon  granting  these 

presents ;  therefore  we,  the  said  A.  B.,  C.  Z).,  and  E.  F.,  hereby  bind  and  oblige  our- 
selves conjointly  and  severally,  and  our  heirs,  executors,  and  successors  whomsoever, 

to  content  and  pay  to  the  said ,  or  to , 

the  present  manager  of  the  said  bank,  or  to  his  successors  in  office  as  manager,  for  be- 
hoof of  the  said  bank,  and  the  whole  partners  therein,  or  to  the  assignees  of  the  said 
bank,  or  of  its  said  manager,  or  his  foresaid,  the  aforesaid  sum  of  Jive  hundred  pounds, 
or  such  part  or  parts  thereof  as  the  said  A.  B.  shall  receive  or  draw  out  by  orders  or 
drafts  on  the  said  bank,  in  virtue  of  the  aforesaid  credit,  and  also  such  sum  or  sums  of 
money  as  the  said  bank  or  its  said  manager  shall  stand  engaged  for  on  account  of  me, 
the  said  A.  B.,  by  accepted  or  discounted  bills,  letters  of  credit,  guarantees,  or  in  any 
other  manner  of  way  not  exceeding  in  all  the  said  sum  of  Jive  hundred  pounds,  over 
and  above  what  of  the  proper  cash  of  me,  the  said  A.  B.,  may  happen  to  be  lodged  on 
the  said  cash  account ;  and  that  at  any  time  when  the  same  shall  be  demanded,  after 
six  months  from  the  date  hereof,  with  the  legal  interest  thereof  from  the  time  of  ad- 
vance until  the  same  be  repaid,  and  a  fifth  part  more  of  the  said  principal  sum  of  pen- 
alty, in  case  of  failure  or  proportionally  cffeiring  to  the  sum  due,  and  it  is  hereby  de- 
dared,  that  a  stated  account,  made  out  from  the  books  of  the  said  bank,  and  signed  by 

211 


A  Treatise  on  Banking. 

thereof,  for  the  time  with  reference  to  this  pres- 
t  without  any  other  voucher  to  constitute  and  ascertain  a 
i  •*,  and  no  MHpaiuion  shall  pau  open  the  change  so  con- 
I  a*d  Metmioed,  bat  on  conrigwUioa  only.  And  we  consent  to  the  n-Ki»tra- 
t»M  tMtvoC  !•  tk«  book*  of  council  and  Kwion,  for  others  competent,  that  letters  of 
nonuaf .  o«  tis  days'  change  and  all  other  nocoMary  execution,  may  pass  opon  a  de- 
ewa,  to  to  iattrpOMd  komto,  in  common  form,  and  for  Unit  pnrpoae  we  constitute  our 


whetW,  th«  present  written  upon  stamped  paper  by 


DC.  —  Letters  of  Credit, 

OnutttJ  by  Ott  Bank  upon  it*  Ayentt  or  Branch/a. 


BAKX1KG  COMPAKY. 


There  has  this  day  been  lodged  at  this  office  by  _  _    the 
for  the  credit  of  _  whose  drafts  to  that 


yon  will  honor,  and  charge  the  same  to  the  account  of  the 
Company. 

I  am,  Sir, 


Your  obedient  Servant, 

_____^_^___^___  Manager. 
Accountant. 


BANKING  COMPANY. 

No- 

n 

(Not  Transferable.) 
BIB, 

You.  will  be  pleased  to  credit  in  the  sum 

of  ____^__^_^_______  and  charge  the  same  to  the  account  of  the 

_____^_______  Banking  Company,  with  this  branch. 

I  am,  SIB, 

Your  obedient  Servant, 
_____^^^____  Manager. 

Entered Accountant, 

(a.) 

BANKING  COMPANY. 


Paris.  18. 

Thta  IMS*  wffl  be  presented  to  you  by to  whom 

jrwi  will  be  pleated  to  pay  to  the  extent  of deducting  your  charge*, 

fcr  yo«r  reimbursement  his  drafts  on  this  bank,  which  will  meet  with  due 

I  am,  &c. 
212 


Banking  Documents. 

(4.) 

Messrs. 

New  York. 

This  letter  will  be  presented  to  you  by  Mr. ,  In 

whose  favor  we  beg  to  establish  a  credit  for pounds  sterling.    You  will 

please  hold  this  sum,  or  any  part  thereof  at  his  disposal,  less  your  usual  charges,  and 
take  in  exchange  his  drafts  upon  this  bank,  which  will  be  duly  honored.  It  is  under- 
stood that  this  credit  is  to  be  available  for  one  year  from  this  date,  at  which  period,  if 

Mr. . has  not  made  use  of  it,  you  will  consider  it  cancelled.    We 

shall  forward  you,  in  our  next  letter,  the  signature  of  Mr. to, 

which  we  refer. 

I  am,  &c. 


X.  —  Deposit  Receipts. 

These  are  receipts  for  money,  upon  which  the  bank  allows  interest. 
The  following  form  may  be  used : 

. BANKING  COMPANY. 

18 


No.    £. 

Received  from the  sum  of 


sterling  to  the  credit  of  his  deposit  account  with  the Banking 

Company. 

By  Order  of  the  Board  of  Directors. 
Entered  Accountant.  Manager. 

The  following  form  is  a  much  better  one,  but,  unfortunately,  it  is  ille- 
gal. According  to  law,  we  cannot  introduce  the  rate  of  interest  allow- 
ed, nor  the  notice  required,  unless  the  receipt  be  stamped.  It  may  be 
hoped,  that  in  the  next  Stamp  Act,  the  Chancellor  of  the  Exchequer  will 
introduce  a  clause  permitting  the  use  of  such  receipts  as  the  following. 
It  is  used  by  a  highly  respectable  bank  in  one  of  the  Midland  Counties : 

BANKING  COMPANY. 

No. 


18 


Received  from the  sum  of 


for  which  we  are  accountable  with  interest  at  the  rate  of per  cent 

per  annum,  on  receiving days'  notice.    Interest  to  cease  from  day  of 

notice. 

For  the  Directors  and  Proprietors  of  the 

Banking  Company. 

Manager. 


No  interest  allowed  unless  the  money  remains  three  months. 
XI.  —  Requisition  Notes. 

These  are  notes  or  memorandums  which  are  used  by  some  banks  to 
enable  their  customers  to  state  with  less  trouble  what  they  require,  and 

213 


A  Trttlite  on  Banking. 

to  •pecify  the  ceah  they  pay  into  the  bank.  They  are  usually  placed  on 
the  counter,  to  be  ready  when  wanted.  The  following  are  the  forms 
most  in  us*:— 

0-) 

REQUISITION  Now. 


fcri/ 

1| 

SpcciflcaUon  of  Mone 
precootod  to  the  Ca«hu 

Banking    Company 

™J 

far  U»  mm  of 

Applieca*. 

LKTTXK  or  CREDIT. 


KpKiflcaUeo  ofMaMy. 

Bftnk  of  EnffUod  Note* 

18 

Gold  .    . 

Wanted,  the 

Bunking  Company's 

Letter  of  Credit  on 

Local  Notet     .... 

in   favor  of 

Bill*     

for 

— 

— 

— 

.   Applirnnti 

£ 

£ 

Entered  to  Credit  of. 


(3.) 
PATMKXT  TO  CREDIT  or  CURRENT  Accouxr. 


BpKMcttkM  W  Moo*r. 

Paid  to  the  . 

18 

Buk  of  Eagbnd  Notes 
Gold  

Bflvw  and  Copper  .    . 
LoealMMH    .    .    .    . 
Bilk    .... 

Company,  the  sum  of  _ 

to  be  placed  to  the  en 
in  current  account  with 

>dit  of 

laid  bank. 

By 

J 

in  the  Bank's  Cash  Book,  £ 
(4.) 


IWbr. 


ArrucATiox  VOR  ACCOCHT. 

NamM  of  Peraooj  compoalng  the  Firm. 


ProbabU  return    . 
Ad  rape*  required 
Seewitj  proposed 
OAr  tt  te  Board  per  Minute,  I 

is     5 — 


214 


Banking  Documents. 

(5.) 
BILLS  DISCOUNTED 


to                                                            ,on                                            ,  18 

No. 

•When  Payable. 

Postage. 

WhenP'ble. 

Daya 

Amount  of  Bill. 

Discount. 

Proceeds. 

XII,  —  A  Letter 

Summoning  a  General  Meeting  of  the  Shareholders, 
BANKING  COMPANY. 


-.18- 


SlB, 

I  beg  leave  to  inform  you  that  the  Annual  General  Meeting  of  the  Proprie- 
tors of  this  Company,  pursuant  to  the  deed  of  settlement,  will  be  held  at  twelve  o'clock 

on instant,  at  the  _! in  this  place,  for  the  purpose 

ol  electing  Directors,  and  for  the  despatch  of  other  business. 

A  list  of  all  the  Proprietors  qualified  for  the  direction  by  holding  fifty  shares  and 
upwards,  is  annexed. 

I  am,  Sir, 

Your  obedient  Servant, 

,  Manager. 

Most  large  banks  have  also  a  printed  form  for  their  letters  of  ordinary 
correspondence,  as  the  following :  — 

SIB 

I  beg  to  acknowledge  the  receipt  of  your  favor  of  the 

inclosiag  sundries  £ and  undue  bills £ 

the  credit  of  your  account.    Your  advices  have  due  attention. 

You  are  credited  for  the  following sums  received. 

I  am,  Sir, 

Your  most  obedient  Servant, 


.for 


Xin.  —  Special  Contracts. 

Those  joint-stock  banks  that  are  not  formed  under  the  Act  of  7th  Geo. 
IV.  Cap.  46,  sue  and  are  sued  in  the  names  of  their  trustees.*  And  to 
enable  them  to  do  so,  those  parties  who  open  accounts  with  the  bank 

*  These  banks  obtained  in  1844  the  power  of  suing  and  being  sued  in  the  names  of 
their  registered  public  officers. 

215 


A  Treatise  on  Banking. 

into  •  speck)  contract.    This  may  be  done  by  a  letter  addressed  to 
personally,  in  a  form  similar  to  the  following :  — 


7*4. 

OKVTLBJIEX, 

YOB  ranging  thai  th«  ________  Banking  Company  shil!  pay 

10  »•  whatever  mua«  BUT  be  doe  to  me  on  my  current  or  other  account*  with  it,  I 
bmhy  *f™*i  •*  •  «*p»rate  contract  with  you,  to  pay  to  yon  or  the  survivors  of  you, 
aflfcy  4tBMBd.  the  balance,  if  any,  which  shall  at  any  time  hereafter  be  due  by  no  to 
UM  ff>H  Banking  Company  on  those  accounts  or  otherwise, 
I  am,  Gentlemen, 

Your  obedient  Servant, 


XFV.  —  Notice*  of  Calls  for  further  Payment  on  Shares. 

BANKING  COMPANY. 

,  18 

SIB, 

I  beg  to  inform  yon  that  the  Board  of  Directors  of  this  Company,  agree- 
ably to  the  powers  contained  in  clause  No. of  the  deed  of  constitution  of  the 

Company,  hare  made  a  third  call  of  £ per  share  on  each  of  the  share* 

ia  the  Company,  and  that  the  same  will  become  payable  on  the  </ 

next 

The  certificate  for  your  share  is  at ,  and  will  be  delivered  to  yiu 

oa  payment  of  £ ,  and  in  exchange  for  that  now  in  your  possession. 

You  will  please  to  take  notice,  that  all  payments  for  colls  must  be  made  free  of  post- 
age, and  in  cash,  on  or  before  the of ,  otherwise  they  vill 

BO*  be  received  except  with  interest  at  the  rate  of  5  per  cent,  per  annum  from  that 

I  am,  Sir, 

Yonr  most  obedient  Servant, 
,  Manager. 

• 

XV.  —  Certificates  of  Shareholders. 

- BANKING  COMPANY. 


CENTRAL   BANK, 


ThU  i«  to  certify  that  Mr. ,  of ,  i«  *  pro- 

palllorof •hares  in  the  capital  stock  of  the Banking  Cora 

BBBj,  OB  which  _____  per  share  has  been  paid.  And  as  the  proprietor  thereof,  he 
is)  entitled  to  aD  benefit!  and  emoluments  arising  from  such  shares,  agrecaUy  to 
•ha  deed  of  settlement  of  the  company,  dated  the day  of ,  15 • 

A*  WBMlBl«»  hand  this day  of ,  one  thousand  eight  hun- 


)  Two  of  tht  Director! 
J      oj'lltf  (  omjiany. 


216 


Banking  Documents. 

Some  banks  exchange  the  old  certificates  for  new  ones  after  every 
call ;  others  do  not  grant  new  certificates ;  and  some  do  not  issue  certifi- 
cates at  all,  unless  a  party  requests  to  have  some  evidence  that  he  is  a 
shareholder. 

XVI.  —  Deed  of  Transfer. 

This  deed  is  executed  by  the  buyer  and  seller  of  any  shares  in  the 
bank,  after  the  directors  have  given  their  consent  to  the  transfer.  The 
following  is  the  form  of  this  instrument :  — 

This  Indenture,  made  the day  of ,  18 ,  between , 

of ,  of  the  first  part ; ,  of ,  of  the 

second  part ;  and ,  of  the  City  of ,  trustees  (ap- 
pointed by  the  board  of  directors  of  the Banking  Company)  of  the 

covenant  hereinafter  contained,  of  the  third  part. 

Whereas  the  said has  become  the  purchaser,  with  the  approba- 
tion of  the  said  board  of  direction,  of share  in  the  capital  of  the  said  company : 

on  each  of  which  shares  the  sum  of pounds  still  remains  unpaid. 

Now  this  indenture  witnesseth,  that  in  consideration  of  the  sum  of ,  at 

or  before  the  sealing  and  delivery  of  these  presents  paid  by  the  said 

to  the  said ,  the  receipt  of  which  said  sum  of the  said 

doth  hereby  acknowledge,  and  from  the  same  and  every  part 

thereof  doth  release  and  for  ever  discharge  the  said 1,  his  heirs,  ex- 
ecutors, administrators,  and  assigns :  the  said hath  bargained,  sold, 

and  assigned,  and  by  these  presents  doth  bargain,  sell,  and  assign  unto  the  said 

,  his  executors,  administrators,  and  assigns,  all  those  the  said 

shares  of  his,  the  said  ,  in  the  capital  of  the 

Banking  Company,  and  all  benefits,  advantages,  powers,  and  privileges  attending  the 
same ;  to  have,  hold,  receive,  and  take  the  said  shares  hereby  assigned,  and  the  said 
benefits,  advantages,  powers,  and  privileges  attending  the  same,  unto  the  said 

,  his  executors,  administrators,  and  assigns,  for  his  and  their  own 

use  and  benefit. 

And  the  said doth  hereby,  for  himself,  his  heirs,  executors,  and 

administrators,  covenant,  promise,  and  agree,  with  and  to  the  said 

and ,  their  executors  and  administrators,  that  in  respect  of  the 

share     hereby  assigned,  and  all  and  every  other  share  and  shares  which  the  said 

may  hereafter  purchase  in  the  capital  of  the  said  company,  he,  the 

said ,  his  heirs,  executors,  or  administrators,  shall  and  will,  well 

and  truly,  in  all  respects,  observe,  perform,  and  keep  all  and  singular  the  covenants, 
agreements,  and  provisions,  contained  in  the  deed  of  settlement  of  the  said  company, 

bearing  date  the  day  of ,  18 ,  so  far  as  the  same  ought  on 

his  or  their  parts  to  be  observed,  performed,  and  kept. 

In  witness  whereof,  the  said  parties  to  these  presents  have  hereunto  set  their  hands 
and  seals,  the  day  and  year  first  above-written. 

Witness  to  the  identity  and  signature  of 


Signed,  sealed,  and  delivered  by 

In  the  presence  of  _ 


s  217 


A  TVvofue  on  Banking. 


It  b  M«IM  All  Ikh  4ff*fffy"*  should  ho  completed  and  left  at  the  office  of  the  com 

paay  without  delay,  when  a  certificate  of  the  share*  will  be  giren  to  the  purchaser,  into 

M*  Uw  shares  cannot  be  placed  until  this  regulation  it  complied  with. 


XVII.  —  Circular  Notes,  i$9*ed  by  the  London  and  Westminster  Bank. 
LONDON  AND  WESTMINSTER  BANK. 

\        .  LBTTU  »»  CMDIT  CIBOCLAIRB  pour  £ StcrU. 

Londret,e» ,  18_. 


i  MM  Lettrtt  J  Indication. 

MMUBCM, 

0**  lettre  Tooi  sera  remise  par  M . ,  dont 

TOO*  iroamea  la  signature  dans  notre  Lcttro  d'Indication  susdite.    Je  voua  prie  do 

Tooloir  bien  loi  compter  sans  frais  quelconques,  la  Talcnr  de Livren 

Btariins,  ao  oours  a  Usance  sur  Londrea  centre  sa  traite  ci-jointe  sur  cctte  Banque. 
•Tai  1'honncur  d'etre, 
Messieurs, 

Votre  tres  obcissant  Serviteur, 

,  Secretaire.  ,  Gtrant. 

On  the  other  side :  — 

LONDON  AND  WESTMINSTER  BANK. 

Lo*dret,  ce ,  18 . 


A  sept  jour  de  me  prefix  payee,  a  1'onlre  de  M. 
Lirres  Sterlini  raleur  recue. 


Circular  Notes  are  accompanied  by  the  following  Letter  of  In- 
dication :  — 

LKTTRB  D'IHDICATIOJC. 
LONDON  AND  WESTMINSTER  BANK. 

LonJreg,  ce ,  18 . 

L«  portew  d«  eette  Lettre,  M. ,  pour  leqnel  nous  re- 

TO«  anendoot,  est  muni  de  DOS  Billets  de  Change  Circulaires  pour  son  voyage 
priow  de  lai  en  fournir  la  raleur  snr  son  double  acquit  an  cours  du  change 
a  •nun  sw  notre  place,  et  sans  deductions  de  frais,  d'apres  no»  instructions. 
8i  la  nil*  ou  il  en  toocnera  le  montant  n'a  pas  de  change  direct  sur  Londres,  TOUS 


!••<!•  MM  «  combiner  nn  arec  la  place  cambistc  la  plus  routine. 

Yo«  obsirvMM  qoe  toot  Agio  sur  especes  d'or,  on  d'argent,  et  tons  frais  extraordi- 
MiTM  daM  !•  nu  d'un  riimhrailiemillll  indirect.  dniv«nt  /-tre  mnnartku  nar  le  i.ortcur. 


daas  le  CM  d'on  remboonement  indirect,  doivent  etre  supporter  par  le  porteur, 
••  pt**eejt  etn  a  ootiv  charge. 

218 


Banking  Documents. 

Cette  Lettre  devant  accompagner  nos  Billets  Circulaires  doit  raster  dans  les  mains 
de  leur  porteur  jusqu'a  leur  epuisement. 

Nous  avons  1'honneur  d'etre, 
Messieurs, 

Vous  tres  humble  et  tres 

obeissants  Serviteurs, 
,  Gerant. 

,  Secretaire. 


Vittes.  Correspondents. 

Abbeville,        MM.  Gavelle  &  Cie. 
Aix  la^  Chapelle,    .  Oeder  &  Cie. 

Charlier  &  Schiebler. 
.  Guiton  Talamel. 
C  Wm.  &  Kobt.  Black 
i     &Co. 

Briggs  &  Cie. 
.  Grimaux  &Codeville. 

Hope  &  Cie. 
.  G.  Terni  &  Fils. 

Osy  &  Cie. 
.  F. 'Strong. 

P.  de  Stettin. 
.  Thomas  Freres. 

F.  Hullin. 
.  F.  S.  Meyer. 

Augustus  Klose. 


Do. 
Aix  en  Provence, 

Aleppo,      .    .    . 

Alexandrie, 
Amiens,    .    .    . 
Amsterdam,     . 
Ancone,    .    .    . 
Anvers,  .    .    . 
Athenes,  .    .    . 
Augsbourg, .    . 
Avignon,  .    .    . 
Avranches,  .     . 
Baden  Baden,    . 

Do. 

Bagn£res  de  Bigorre,VilTeneuve  &  Cie. 
"  Gerona,  Freres  Cla- 
ve, &  Cie. 
Villeneuve  &  Co. 
Basle^  .'....    Vischer  &  Fils. 
Bayonne,  ....  Capt.  Graham. 

•D  .      .  C  Wm.  &  Kobt.  Black 

ieirout,  .    .    .    .  £     &  CQ 

Bergen,     ....  A.  Grieg  &  Fils. 
Berlin,     ....    Les  Freres  Schickler. 

Berne, Marcuard  &  Cie. 

Besan^on,    .    .    .    Jacquard  &  Cie. 

Blois, A.  Bruere. 

Bologne  en  Italic,     F.  Perotti. 
Bonn, Jonas  Cahn. 


Barcelone, 


Bordeaux, 
Boulogne  S  /  M. 

Bremen,    .    .    . 
Breslaw, .    .    . 
Bruges,     .    .    . 

Brunswick,  .    . 

Brflnn,      .    .    . 
Bruxelles,    .    . 

Cadiz,  .    .    .    . 


Barton  &  Guestier. 
Alexandra  Adam  & 

H.  Schroder  Fila. 
Eichhorn  &  Cie. 
F.  Du  Jardin. 
Freres  Lobbecke  & 

Cie. 

J.  Herring. 
F.  Brugmann  &  Fils. 
Lonergan  Freres  & 

Cie. 
E.  Guilberr  &  Cie. 


Caen,      .    . 

Cairo, Briggs  &  Cie. 

Calais,     ....    P.  Devot  &  Cie. 
Cambray,  .    .     .    .  N.  Boniface  &  Fils. 
Carlsbad,     .    .    .    B.  Gottl  &  Fils. 


Villes.  Correspondents. 

Carlsruhe,      .  MM.  Augustus  Klose. 
Cassel  (Hesse),     .    L.  Feidel. 
Cette F.  Durand  &  Fils. 

C  Ve.  Python  &  Ge- 

(     noud  Fils,  aine. 

.  Mauger  Freres. 

C  John  Thomas  Lowe, 


Chambery,  .  . 
Cherbourg,  .  , 
Civita  Vecchia, 

Coblentz,  .    .    , 
Cobourg,   .    . 
Cologne,      .     . 
Constance, 

Constantinople, 

Copenhagen, 
Corfu, 


.  F.  H.  Kehrmann. 

.  Schraidt  &  Cie. 
J,  D.  Herstatt. 

.  Macaire  &  Cie. 

C  Chas.  S.  Hanson  & 

\     Cie. 

.  Frolich  &  Cie. 

J.  Courage. 

Damascus,    .    .    .  G.  H.  Gibb  &  Cie. 
Dantzig,  ....     Gibsone  &  Cie. 
Darmstadt,    .    .    .  J.  A.  Zoeppritz. 
Dieppe,  ....    Quenouille  aine. 

Dijon, Drevon  &  Marion. 

Dresde,   .     .    .     .    M.  Kaskel. 
Dunkirk,  ....  Charles  Carlier. 
Dusseldorf,  .    .     .    G.  Cleff. 

T?I.     c  , ,  C  Vonder  Heydt  Ker- 

Jiilberleld,  .    .    .   <  a  •Btti 

(      sten  &  it  ils. 

Elsineur,      .    .    .    N.  &  C.  Fenwick. 

Emms, Deinhard  &  Jordan. 

Florence,      .    .     .    Plowden  &  French. 
Frankfort  S\  M.,    .  Gogel,  Koch  &  Cie. 
D  C  M.  A.  de  Bothschild 

'  ^     &  Sons- 
Gand, Bank  of  Flanders. 

Gibbs  &  Co. 

Lombard,  Odier  & 
Cie. 

Archbold  &  Cie. 

L.  &  P.  Benfey. 

Arnstein  &  Eskeles. 

Scheurleer  &  Fils. 

S.  Heine. 

L.  &  A.  H.  Cohen. 


Genes, 
Geneve,     . 

Gibraltar,     . 

Gottingen, 

Grafenburg, 

Hague,      . 

Hambourg, . 

Hanovre 

Havre,     ....    —  Dubois  &  Cie. 

Do Etienne  Troteux. 

Heidelberg, .     .     .     C.  A.  Fries. 
Inspruck,  ....  Louis  J.  Mayer. 
Interlachen,      .     .    Isidor  Jackowski. 
Jerusalem,     .     .     .  W.  T.  Young. 
Kissingen,   .    .    .    Freres  Bolzano. 
219 


A  TVvrtiM  on  Banking. 


'-  . 

LlCf'.  *.  *. 

?HF  v 

OMnayiiHiiis. 
MM   C.  L.  Andewch. 
.    .  Chaw.  Bmkm. 
.    .    M  Kaakd 
.    .FrtMACie. 
.    .    M.J.VmtwACie. 
.    .  ROM*  Malhoa. 

Pan,   .    .    .    MM.  Mention  ain6, 
Perpignan,    .    .    .  F.  Duruiul. 
IViiUi,      .    .    .    .    C.  J.  Malvicux. 

1*0*1     V.  Pnv«nul«_ 

Prague,  .    .    . 
PrwDourK,     .    . 

K.lst.-lclt,   .        .        . 

Katisbonnc,   .     . 
Rennet,        .     . 
Klii-inu,    .     .     . 

..... 

.    C.  A.  FeidlerAFiU. 
.  Arnstein  A  Eskeles. 
.    F.  8  Merer. 
.  G.  W.  Henle 
.    C.  Le  Ray. 
.  Ruinart,Pere  A  Fils. 

I.mi.  .  .  . 
LUKMM,.  . 

Lhoaiuu,  . 
Lvbec,  .  - 

M.  SrhcibeopOfW 
•    '{     KkUra. 
.    .  H.  0  Scholto. 
.    .    W.  Mar  bean  4  Cie. 
.    .  Frtre*  Mullcr. 

I  aniM,  .    . 
Do.    Bain* 

.    .    F.  Knocrr  A  Fils. 
.    .  F.  Petrl. 
de  .    Plowden  A  French. 
.    .  Ve.  Gueriii  &  Kiln. 

.  Torlonia  A  Cie. 

Do.  . 

C  I'lowden,  Chulmeley, 
•\     A  Co. 
.  J.  Faucon. 

Madeira,  . 
Madrid,  .  . 

%*»"  ' 

Malta,  ,  .  t 

(  Munlix-k  .Short  riiliri- 
•    '[     ACie. 
.    .  H.  O.  Shea  &  Cie. 
.    .    John  Giro. 
.    .  Jar  Bell  A  Cie. 

Kottcrdam,  .    . 
Sal/.hourg,      .     . 

Scbaffhonse,    . 
Schwalbach,  .    . 
Seville,    .    .    . 

C  D.  A  C.  Blankcn- 
•  ^     hcyn. 
.  —  Spath,  inc. 
.    Frey  A  Fils. 
.  M.  Bcrle. 
.    Cahill,  White  A  Cie. 

Manbrim.  . 
Marieobad,  . 

Marseille*,  . 

Mgaui.  .  . 

Matt. 

.    .    J.  O.  Reinhardt. 
.    .  Bernard  Gottl. 
(  Salavay,  Pere,  Fils, 
*    '{     AChs. 
.    .  Fred,  Horn. 

'.  '.  Gailler  A  Cie. 

Smvrna,     .     .     . 
St.  Gall,  .    .    . 

.  Leo  A  Fils. 
.    J.  J.  Meyer  Fils. 

St.  Malo,  .    .    . 
St.  Omcr,    .    . 

St  Petereburgh, 
Spa,     .... 

.  P.  Fontan. 
.    A.  Cafficri. 
(  Cayley,  Mobcrly  A 
I      Cie. 
.  J.  F.  Hay^mal. 

Milan,  .  ... 

MMjllinir. 

C  Carli  di  Tommaso 
•  1     ACie. 
.    .    F.  Dnrand  A  Fils. 

Stockholm,  .    . 

Stuttgard,       .     . 

Strasbourg, 

Tarbes,      .    .    . 
Toplitz,  .    .    . 
Toulon,     .    .    . 
Toulouse,    .     . 
Tours,  .... 

.    Tottie  &  Arfwcdson. 
(LcsFilsdeG.  11. 
{      Kdlcr. 
(  Rcnouard  de  Bus- 
'  \     sii-rc. 
.  Villcneuve  A  Cie. 
.    Emanuel  Mayfir. 

.    J.  Cassaing  A  Co. 
.  Gouin  Frcres. 

Muiefa,  .  . 
Nancy,  .  .  . 

.    .    A.  E.  D'Kichthal. 
.    .  Elie  Bailie. 

Xante*,  .  . 
Naple*.  .  . 

Do.     .    . 

Neufrbatd,  . 
N«r  York  . 
•  | 

.    .    P.  Ciret  A  Cie. 
.    .  W.  J.  Turner  A  Co. 
(  C.  M.  de  Rothschild 
'  I     A  Son*. 
.    .  F.  Henri  Nicolas. 
.    .    J.  O.  King  A  Sons. 

Treven,    .    .    . 
Trieste,     .    .    . 

.    Reverchon  &  Cie. 
.  J.  Collioud. 

Turin,      .     .     . 
Valenciennes,    . 
Venice,    .    .    . 

.    Nigra  Freres. 
.  G.  Serret  A  Cie. 
.    Schielin  Freres. 

lta«,  .  . 

Narrmberg,  . 

oSgTT. 
2e^  •  • 

OJim,  .  . 

o—d,  .  . 

ITMBHOO,  . 
P*h,  .  .  . 

(  Vinceiu  Devillas  & 
'    'I     Cie. 
.    .  Leonard  Kalb. 
.    .    E-MahiACie. 
.    .  Barmeater  A  Co. 
.    .    DtqoAt  ainfc  A  Cie. 
.    .  F.  A.  Belleroche. 
.    .    G.  Wood  A  Cie. 
.    .  Callaghan  A  Fils 

.    P.  Gcnton  A  Cie. 

Vienne,     .    .    . 
Utrecht,  .     .     . 
Warsaw,   .    .    . 
W.  irner,       .     . 
Wiesbaden,   .    . 
Wurrbonrg, 

Zurich,       .    .    . 

.  Arnstein  &  Eskeles. 
.    VlaerAKol. 
.  s    A.  FraenkeL 
.    J    l.lkan. 
.  M.  Berle. 
.    G.  Ochninger. 
C  Gaspard  Schulth6ss 
{     A  Co. 

Do.  ... 

CDe  RoUuchild  " 

I'anna,  .  . 

*l     Freres. 
.    .  L.  Laurent. 

220 


Banking  Documents. 

XVIII.  —  A  Table,  showing  the  Relative  Value  of  Gold  in  London  (at 
the  Mint  Price  of  £3  17s.  10|d.  per  Ounce  Standard),  and  in  the 
Cities  of 


HAMBURGH. 


AMSTERDAM. 


Price  per 
Premium,                   Cents.       Per      marc  line.                          Sch.           Per      Premium,                                            Per 

Per  mille.Fcs.  Cts.  In  the  £.  cent.        Mates.       Mcs.  Sch.  In  the  £.    cent.     Per  cent.   Flor.  Cts.      Cents.       cent. 

0    . 

25  14i         * 

•01        430 

13     7i      4            -06        13 

11    93i         * 

•02 

}  • 

"    '^i          i 

•02             * 

"If          -11          i 

"    94}         i 

•04 

1   . 

"    17           } 

•03             i 

"       *      f            -17           * 

"    96 

•06 

1}  • 

"    18*        1 

•04 

"       f      }            '23           I 

"    97i        1 

•08 

2    . 

"    19*       2 

•08       431 

13     8        f            '29           i 

"    98}       2 

•17 

2*  . 

"    204       3 

•12             * 

"       i      I            '34           I 

12                3 

•25 

3    . 

"   22         4 

•16             i 

"       *      J            '40           * 

"    01}       4 

•33 

3}  . 

"   23*       5 

•20             } 

"       i     I              '46           I 

"    02J       5 

•42 

4    . 

"   24i       6 

•24    "  432 

"       1    2              -92        14* 

"04         6 

•50 

4}  • 

"   25i       7 

•28             * 

"43            1-38           i 

"    Of>i       7 

•58 

5    . 

"   27f       8 

•32             | 

"       }    4            1-84           * 

"    06}       8 

•67 

5}  . 

28*       9 

•36             | 

"|5            2-30           i 

"08         9 

•75 

6    . 

29i     10 

•40       433 

13     9      6            2-76           | 

"    09*     10 

•83 

6}. 

30}     11 

•44             * 

"       i                                   f 

"    10i     11 

•92 

7    . 

32*     12 

•48             } 

"       *                                   } 

"    12       12 

1- 

7}. 

33i     13 

•52             } 

"      i                            l 

"    13*     13 

1-08 

8    . 

34A      14 

•56       434 

",                               15 

"    14}     14 

1-17 

8}  . 

36       15 

•60             * 

"    16       15 

1-25 

9    . 

37i     16 

•64             i 

i                             * 

"    17*     16 

1-33 

9}  . 

39i     17 

•68 

'       f                             I 

"    18}     17 

1-42 

10    . 

39}     18 

•72       435 

13    10*                                   | 

"    20       18 

1-50 

10}. 

41        19 

•76             * 

i                                   4 

"    21*     19 

1-58 

11    . 

42*     20 

•80             } 

i                                   I 

"    22i     20 

1-67 

11}  . 

43i     21 

•84 

"                                          £ 

"    23}     21 

1-75 

12    . 

44}     22 

•88       436 

'       I                                16* 

"    25*     22 

1-83 

12}  . 

46       23 

•92             * 

'       I                                                              23 

1-92 

13    . 

47*     24 

•96             } 

*                                                                       24 

2- 

13}  . 

48*     25 

1-                f 

'       I                                                              25 

2-08 

14    . 

49}     26 

1-04        437 

13    11*                                                              26 

2-17 

14}  . 

51       27 

1-08             * 

'        }                                                                  27 

2-25 

15    . 

521     28 

1-12             i 

"       *                                                              28 

2-33 

15}  . 

53*     29 

1-16             } 

1                                                                       29 

2-42 

16    . 

54}     30  ' 

1-20       438 

"       *                                                              30 

2-50 

16}  . 

56       31 

124             * 

17    . 

57*     32 

1-28             } 

"       * 

17}  . 

58}     33 

1-32             } 

18    . 

59}     34 

1-36       439 

13    12 

18}  . 

61       35 

1-40             * 

"      4 

19    . 

621     36 

1-44             } 

;;    t 

19}  . 

pZ     37 

1-48             } 

20    . 

64}     38 

152       440 

"    } 

20}  . 

66       39 

1-56 

21     . 

67*     40 

1-60 

214. 

6?§ 

22    . 

69} 

22}  . 

71 

23    . 

9*U 

72* 

£>o*   . 

24    . 

74} 

24}  . 

76 

25    . 

77} 

METHOD  op  USE. — (For  example,  take  Paris.) — Ascertain  the  premium  on  gold  at  Paris — say  9  per 
mille;  in  the  left-hand  column,  against  9,  will  be  found  the  rate  of  exchange  per  pound  sterling  produced 
francs  25-37*.  From  that  rate,  deduct  the  exchange  on  London  at  short — say  francs  25  27J.  leaving  a 
remainder  of  9}  centimes  per  pound  sterling.  In  the  second  column,  it  will  be  found  that  fi}  centimes 
in  the  pound  sterling  are  equal  to  '39  per  cent. ;  consequently,  gold  is  '39  per  cent,  dearer  in  Paris  than 
in  London. 

NOTB.— [f  the  rate  of  exchange  produced  by  gold  in  Paris  be  lower  than  the  exchange  at  short  on  Lon- 
don, gold  will  be  dearer  in  London  than  in  Paris. 


PRUSSIAN   COIN.  —  Thaler,  Silbergrossch,  and  Pfenning.    1  thaler  =  30  silbgr. ; 
1  silb.  =  12  pfennings. 

FRANKFORT.  —  Gulders,  Kreutzers,  and  Hellers.    1  gulder  =  60  kreutz. ;  1  kreutss 
=  4  hell. 

DUTCH.  —  Guilders  and  Cents.     1  guild.  =  100  cents. 

BELGIUM  AND  FRANCE.  —  Francs  and  Centimes.     1  franc  =  100  centimes, 
s*  221 


A   Trtatue  on  Banting. 


XIX.  —  4  TtMt  of  Englith  Money*  reduced  into 


M  •  \\ 

,  on 

Ai«ta.»«j. 
JW,  ag.  Pf. 


—       1 

• 

<l 

*_  4 

.~  ft 

„  10 

...  1ft 


10     ... 


40  ... 

50  ... 

CO  _. 

70  ~ 

80  ~. 


~  1 

•j 

~.  ft 

-.  10 

...  so 

1  -. 

1  10 

1  SO 

a  10 

•  ... 

6  80 

13  10 

H  H 

33  10 

40  ... 

46  80 

53  10 

60  ... 

66  SO 

133  10 

800  ... 

866  20 

333  10 

400  ... 

HJ  M 

533  10 


10 

a 
I 


1 


nUNDOR 

I.  UN 

llfuLMkr. 

Out.    Kr.  Ha. 

3  ... 

6  ... 

9  ... 

17  ... 

35  ... 

11  ... 

1     47  ... 

8     88  ... 

8     58  ... 

5     57  ... 

8     55  ... 

11     54  ... 

23     48  ... 

35     48  ... 

47     36  ... 

59     30  ... 

71     24  ... 

83     18  ... 

95     18  ... 

107  06  ... 
119 
238 
357 
476 
595 
714 
833 
952 


H   MM 


ou. 


1 
1 
2 
3 
6 
9 

18 

24 

36 

48 

60 

72 

84 

96 

108 

120 

240 

360 

480 

600 

720 

840 

960 


05 
10 
15 
30 
60 
20 
80 
40 


Ki:r\c  H 


86fr.  lOcU. 

Fr.  Ct». 

...  10 

...  80 

...  31 
...  62 

1  25 


8  51 

3  76 

5  08 

6  27 
12  55 
18  82 
25  10 
50  20 
75  30 

100  40 

125  50 

150  60 

175  70 

200  80 

225  90 
Ml 
502 
753 

MM 

1255  .. 

1809 

1757 

-.M     S 


Valm  at  which  thefollomny  Coint  an  generally  current. 


bflidi  Shilling,     . 
Dttth  10-guilder  piece, 


Fred.  d'Or,      .       . 

Pr**mn  Thmlrr. 
Frmrh  Crown  Th-kr, 

OoavHrthm  do. 

Ptee*  of  80  Krratzen, 
Pico,         M 
do,     . 


771. 
6 

5 
3 

5 

1 
1 
1 
1 

5 

1 


Sg. 
20 
10 
20 

4 
17 
20 

16 
16 
10 

6 
12 
10 

8 


FRANKFORT. 

On/.  Kr. 

11  50 

...  35 

9  54 

5  30 

...  58 

9  44 

1  45 

2  44 
2  42 
2  24 

...  24 

9  30 

2  20 

...  28 


HOIXAXD. 

OvU.  Cent. 

12      ... 

...      58 

10       ... 

5      60 


80 
70 


2      65 


54 
35 

48 


Bnonm 

AND 

FKANCB. 
FT.  Cent. 
25  ... 


1 

21 
11 

2 
21 

3      70 


20 
16 
60 
11 


20 
5 
1 


The  above  table  has  been  circulated  by  the  General  Steam  Navigation 
Company.  On  thk  subject  I  would  refer  to  Mr.  Waterston's  "  Manual 
of  Commerce :  being  a  Compendium  of  Mercantile  Tablet,  British  and 

•  For  M  aceomt  of  the  KiUer  and  Gold  Coin*  of  different  Countries,  and  their 
Value,  tee  the  New  London  Mercantile  Directory,  for  1849. 


Banking  Documents. 

Foreign  Moneys,  Weights,  and  Measures,  and  the  Theory  and  Practice 
of  Exchange"  (Simpkin,  Marshall  &  Co.,  publishers.)  We  think  also 
this  is  a  proper  place  to  introduce  the  following  account  of  the  origin  of 
English  Coins :  — 

"  POUND.  —  Though  a  pound  is  one  of  the  most  common  denominations  for  money, 
it  never  was  a  real  coin,  either  in  gold  or  silver,  in  any  age  or  country.  Such  large 
and  ponderous  coins  would  have  been  in  many  respects  inconvenient.  But  for  many 
ages,  both  in  Britain  and  in  other  countries,  that  number  of  small  coins  which  was  de- 
nominated a  pound  in  computation,  or  a  pound  in  sale,  really  contained  a  pound  of 
silver,  and  they  might  have  been  and  frequently  were  weighed,  as  well  as  numbered, 
to  ascertain  their  value.  If  the  number  of  coins  that  were  denominated  a  pound  in 
sale,  did  not  actually  make  a  pound  in  weight,  an  additional  number  of  coins  were 
thrown  in  to  make  up  the  weight. 

"  MONEY  was  coined  in  the  Temple  of  Juno  Moneta,  whence  our  English  word 
money. 

"  COIN.  —  Coin  (cwna,  pecunia)  seems  to  come  from  the  French  coign,  that  is,  angu- 
lus,  '  a  corner ' ;  whence  it  has  been  held  that  the  ancientest  sort  of  coin  was  square 
with  corners,  and  not  round  as  it  now  is. 

"  CASH.  —  Cash  in  a  commercial  style  signifying  the  ready  money  which  a  merchant 
or  other  person  has  at  his  present  disposal,  and  is  so  called  from  the  French  term 
caisse,  that  is,  '  chest  or  coffer,'  for  the  keeping  of  money. 

"  GUINEA.  —  This  coin  took  its  denomination  Guinea,  because  the  gold  whereof  the 
first  was  struck  was  brought  from  that  part  of  Africa  so  called ;  for  which  reason  it 
likewise  formerly  bore  the  impression  of  an  elephant. 

"  The  value  or  rate  of  the  guinea  has  varied.  It  was  first  struck  on  the  footing  of 
20s. ;  but,  by  the  scarcity  of  gold,  was  afterwards  advanced  to  21s.  &d.,  and  again  sunk 
to  21s. 

"ANGEL. — The  angel,  called  in  the  French  angelot,  was  a  gold  coin,  value  10s., 
struck  in  England,  where  some  few  are  still  to  be  seen  in  the  cabinets  of  the  curious. 
It  had  its  name  from  the  figure  of  an  angel  represented  on  it ;  which  figure  was 
adopted,  according  to  Rapin  and  others,  to  commemorate  a  pun  of  Pope  Gregory  the 
Great,  which  seems  to  have  greatly  flattered  the  vanity  of  the  nation.  Struck  with  the 
fair  complexions  and  blooming  countenances  of  some  Anglo-Saxon  captives  who  had 
been  brought  to  Rome,  he  inquired  of  what  nation  they  were,  and  what  they  were 
called,  and  being  answered  Angles,  'Justly  be  they  so  called,'  quoth  he,  '  for  they  have 
angel-like  faces,  and  seem  meet  to  be  made  co-heirs  with  the  angels  in  heaven.' 

"  SHILLING.  —  The  etymology  of  the  word  scylling  would  lead  us  to  suppose  it  to 
have  been  a  certain  quantity  of  uncoined  silver ;  for  whether  we  derive  it  from  pcylan, 
'  to  divide,'  or  pceale,  '  a  scale,'  the  idea  presented  to  us  by  either  word  is  the  same ; 
that  is,  so  much  silver  cut  off,  as  in  China,  and  weighing  so  much. 

"  There  were  none  coined  till  1504.  Fabian  mentions  them  under  their  proper 
names,  34  Henry  the  Eighth. 

"A  TESTER. —  Tester  is  derived  from  the  French  word  t£te,  'a  head';  a  piece  of 
money  stamped  with  a  head,  which  in  old  French  was  called  '  un  testion,'  and  which 
was  about  the  value  of  an  old  English  sixpence.  '  Tester '  is  used  by  Shakspeare. 

"  Tester,  sixpence,  from  teston,  French,  an  old  silver  coin,  formerly  worth  12</.,  sink- 
ing by  degrees  to  gilt  brass,  and  sixpence. 

"GROAT. —  Other  nations,  as  the  Dutch,  Polanders,  Saxons,  Bohemians,  French, 
&c.,  have  likewise  the  groats,  groots,  groches,  gros,  &c.  In  the  Saxon  times  no  silver 

223 


A  Trfatitf  on  Banking. 

«•!•  biff"  than  a  penny  WM  strode  in  England,  nor  nftcr  the  Conquest  until  Edward 
the  Third,  who.  about  the  jresur  1851,  coined  yn*s«,  that  in,  gnats,  or  yrm<  ;»i'm  >.  \\  hi.  h 
wMfer  W  MM!  so  UM  matter  Mood  till  the  reign  <>t'  Henry  the  Ki-htli,  who,  in 
1 504,  «r*  coined  shilling*. 

,  lUurruiWT,  FAKTBIXO.  —  Camden  dcrires  the  word  'penny*  from  the 


-  The  MOtaM  Eoglioh  fnury,  /*»•»?,  or  fining,  was  the  first  silrer  coin  struck  in  Eng- 
land ;  nay,  and  tiM  only  one  current  among  our  Saxon  ancestors ;  as  is  agreed  by 
Cmtm,  Bp  ihni.  Dr.  Hicks,  4c. 

•  The  penny  was  equal  in  weight  to  our  three-pence ;  fire  of  them  nuulc  one  shill- 
ing, or  sdlling,  Saxon ;  thirty,  a  mark,  or  mancnse,  equal  to  our  ~s.  Cxi. 

•HMD  the  time  of  King  Edward  the  First,  the  penny  was  struck  with  a  cross  so 
•jeepiy  talented  in  it,  that  it  might  be  cosily  broke,  and  parted,  on  occasion,  into  two 
part*,  thonrc  railed  kalf-pautiet;  or  into  four,  thence  callr.l  fmrthim/t,  or  farthings. 
B«l  AM  prince  coined  it  without  indenture ;  in  lieu  of  which,  he  first  struck  round 
halfpence  and  farthings. 

•He  al*o  reduced  the  weight  of  a  penny  to  a  standard;  ordering  that  it  should 
i  thirty-two  grains  of  wheat,  taken  out  of  the  middle  of  the  car.  This  penny  was 
the  f***y  tttrit*y.  Twenty  of  these  pence  wore  to  weigh  an  ounce ;  whence 
the  penny  became  a  weight,  as  well  as  a  coin. 

"  Tfce  penny  sterling  is  now  used  less  as  a  coin,  and  subsists  chiefly  as  a  money  of 
account,  containing  the  1 2th  part  of  a  shilling,  or  the  240th  port  of  a  pound."  (From 


XX.  —  Form  of  Bond  of  the  Guarantee  Society. 

Campania'  Farm.                                                                  AGREEMENT,       } 
£ No 5 

GUARANTEE  SOCIETY. 

AftTicuts  OF  AORKEMEXT  made  and  entered  into  the day  of ,  in 

(V  year  of  ow  Lord  one  thovtand  eight  hundred  and ,  between  the  three  di- 

rector*  of  the  Guarantee  Society,  whote  name*  an  hereunto  subscribed,  on  the  part  and  be- 
uid  Society  of  the  fir*  part,  and of  the  second 


Whereas  the  said  parties  hereto  of  the  second  part  have  applied  to 

the  said  Guarantee  Society  for  a  guarantee  to  the  extent  of 

pond*,  against  any  loss  to  be  sustained  by  the  said : ,  by  or 

feMfb  any  fraw)  or  dishonesty  of ,of ,  while 

••ployed  by  the  said  . in  the  capacity  of 

And  the  said  mctecy  hare  agreed  to  enter  into  such  Guarantee  accordingly,  on  the  terms 
••d  embjeet  to  the  provisions  and  conditions  herein  contained  and  hcn-undcr  written. 
Now  tbesa  presents  witness,  that  in  consideration  of  the  premises,  and 
of  the  sum  of paid  on  behalf  of  the  said 


•s  •  pieejiasi  for  such  guarantee  from  the  day until  the 

H  d*7  «•* ,  one  thousand  eight  hundred  and  forty- , 

g^^^          both  inclusive,  being  one  year  and  part  of  another  year:  It  is  hereby 

•treed  and  declared,  that  from  the  said day  of 

*  *•  «•*  *•/  of _  and  thence  for  one  year,  namely,  to  the  last  day  of 

221 


Banking  Documents. 

. ,  one  thousand  eight  hundred  and  forty- ,  inclusive,  and  for 

every  successive  term  of  twelve  calendar  months  for  and  in  respect  of  which  the  pre- 
mium of  shall  be  paid  to  the  said  society,  and  the  said  society  shall  agree 

to  accept  the  same  (such  payment  to  be  made  on  the  last  day  of in 

each  year,  or  within  fifteen  days  thereafter,  at  the  office  of  the  Guarantee  Society)  dur- 
ing the  service  of  the  said in  the  capacity  aforesaid,  the  funds 

and  property  of  the  said  society  shall,  on  the  terms  and  subject  to  the  provisions  and 
conditions  herein  contained  and  hcreunder  written,  which  are  to  be  taken  as  part  of 
this  agreement,  and  subject  also  to  the  provisions  of  the  deed  of  settlement  of  the  said 
society,  be  liable  to  pay  and  satisfy  unto  the  said ,  at  the  expi- 
ration of  three  calendar  months  after  satisfactory  proofs  and  full  particulars  of  the  loss, 
and  of  the  nature  and  extent  thereof  (verified,  if  the  said  society  shall  so  require,  by 
declaration  under  the  statute  of  5  and  6  Wm.  IV.  c.  62)  shall  have  been  received  at  the 

office  of  the  said  society.    All  such  loss,  not  exceeding pounds,  (provided 

such  loss  shall  have  happened  within  eighteen  calendar  months  next  preceding  the  re- 
ceipt of  such  proofs  and  particulars,)  as  the  said may  sustain 

from  any  fraud  or  dishonesty  of  the  said ,  to  be  committed  after 

the  said day  of ,  and  during  his  uninterrupted  continuance 

in  the  said  service  in  the  capacity  aforesaid.     Provided  always  that  the  „ 

Notice  of  fraud 
said shall  within  ten  days  after  the  discovery  of  to  be  given  with- 

any  matter  in  respect  of  which  any  claim  may  be  intended  to  be  made,  in  tea  days< 
give  notice,  in  writing,  at  the  office  of  the  Guarantee  Society,  of  such  intended  claim, 
and,  as  far  as  the  case  will  admit,  of  all  the  particulars  thereof;  and  from  and  after 
such  discovery,  the  guarantee  herein  contained  shall,  as  to  loss  by  any  act  of  fraud  or 
dishonesty  subsequent  to  such  discovery,  be  at  an  end  :  Provided,  also, 
and  it  is  hereby  agreed,  that  the  funds  and  property  of  the  said  society  gfven'to  be'the 
for  the  time  being  remaining  undisposed  of,  and  inapplicable  to  prior  fu'lds  JR^  prop- 
claims  and  demands,  according  to  the  provisions  of  the  said  deed  of  set-  ty,  after  dis- 
tlement,  shall  alone  be  subject  to  any  claim  in  respect  hereof,  and  that  JJuu^  °f  prior 
neither  any  director  executing  these  presents,  nor  any  proprietor  or 
holder  of  shares  in  the  capital  of  the  said  society,  shall  be  individually  liable  in  respect 
of  any  such  claim,  or  under  this  agreement,  beyond  so  much  of  the  amount  of  the  shares 
then  held  by  him  or  her  in  the  said  capital,  and  not  subject  to  prior  claims  and  de- 
mands, as  shall  not  for  the  time  being  have  been  paid  up.  Provided,  also,  „ 

'  Society  to  have 

and  it  is  hereby  agreed  and  declared,  that  the  said power  to  prose- 
shall,  in  case  of  making  any  such  claim  in  writing  as  aforesaid,  forth-  cute- 
with,  upon  being   required   by  the    said    society,  when    lawful,  arrest   the    said 

for  any  offence  or  offences  that  he  may  have 

committed,  in  respect  of  which  such  claim  shall  have  arisen,  and  personally  appear 

upon  any  examination  or  examinations  of  the  said , 

and  at  Ms  trial ;  and  in  that  case  the  said  society  shall  be  at  liberty,  at  their  own  costs  and 
charges,  to  carry  on  any  prosecution  or  prosecutions  for  such  offence  or  offences,  and  to 
commence  and  carry  on,  in  such  name  or  names  as  they  may  be  advised,  and  for  their 

own  benefit,  any  actions,  suits,  or  other  proceedings  against  the  said , 

for  the  recovery  of  any  moneys  or  chattels  lost  by  his  fraud  or  dishonesty,  or  for  dam- 
ages in  respect  thereof, bping  hereby  indemnified  against 

all  costs,  charges,  damages,  and  expenses  in  respect  of  such  prosecutions  or  other  pro- 
ceedings. And  it  is  further  agreed  and  declared,  that  when  any  such  Any  payrnent  OB 

loss  shall  have  been  satisfied  by  or  on  behalf  of  the  said  society,  an  in-  account  of  fraud 
.  ,   .          ,      .  .  *     .  or  dishonesty  to 

dorsement  m  satisfaction  of  all  claims  shall  be  made  hereon,  and  signed  be  indorsed  her«- 

225 


A  Trralist  on  Banking. 

ihM       bj  the  person  or  persons  to  whom  the  amount  of  cuch  lou  shall  be  paid 

••MM*.  **  MtMMi  •ad  thereupon  theM  presents  shall  be  given  up  to  ami  for 

tiM  tsatitt  trfttn  said  society,  to  be  of  no  farther  force  or  effect  against 

la  wines*  whereof,  the  said  parties  hereto  hare  hereunto  subscribed  their 

IBM  day  and  yes*  first  abore  written. 


to  (As  sijmifiirss  •/!*•  (Ares  Director*. 


••:'•••'•         •..•••"  i 


COHDITIOXS   Or  IH8DRAXCB. 

la  the  event  of  any  loss  for  which  the  society  shall  be  liable,  such  loss  shall  be  borne 
by  UM  society,  ratably  only,  and  in  common  with  any  other  person  or  persons  who 
hare  already,  or  shall  hereafter  during  the  continuance  of  this  guarantee,  become  se- 
curity for  the  said in  the  service  or  employment  above  mentioned,  ac- 

eordiaf  to  the  amount  for  which  each  shall  be  guarantee. 

UM  abore  agreement  is  subject  to  the  condition  that  the  answers  which  hare  been 

ffassi  aad  signed  by  the  said and  by  the  said 

to  tb«  ejections  lettered  from  A  to  I,  both  inclusive,  submitted  by  the  society,  and  con- 

••JMi  !•  a  paper  called"  Form  of  Proposal  for  Guarantee,"  and  dated 

are  in  all  respects  true  and  correct,  otherwise  the  said  agreement  to  be  void. 

That  no  premium  shall  be  returned  under  any  circumstances  after  the  signing  of  the 
above  agreement. 

Jnyutend 


XXL  —  Provident  Clerks'  Benevolent  Fund. 

BULES  AND  REGULATIONS. 

1.  Tide.  — That  this  branch  of  the  association  be  called  "The  Provident  Clerks' 
i  Fund,"  in  connection  with  "  The  Provident  Clerks'  Mutual  Benefit  Asso- 


*•  Qt>j«ct.  —  That  the  object  of  this  branch  of  the  association  is  to  provide  funds,  by 
a,  bequests,  or  otherwise,  for  the  purpose  of  granting  temporary 


or  permanent  relief  to  distressed  clerks,  who  are  or  have  been  members,  their  widows 


*.  Jfmosn.—  That  the  following  persons  shall  be  members  of  this  branch  of  the 
and  be  entitled  to  vote  at  all  general  meetings  of  this  branch  of  the  asso- 


Antt—M*sftben  of  the  Benefit  Department  who  were  admitted  as  clerks  on  joining 
fioyed  in  any  public  or  private  establishment  within  Great  Brit- 


aisv,  who  sokKribe  to  this  fund  not  leas  than  one  guinea  annually,  or  have  given  a  do- 
•riba  of  not  lett  than  tea  gvineas. 

S^tcrAtrt.  —  That  persons  ("not  being  clerks)  may  become 
,  by  ft  donation  of  not  less  than  ten  guineas,  or  an  annual  subscrip- 

226 


Banking  Documents. 

tion  of  not  less  than  one  guinea,  and  be  entitled  to  vote  at  elections  for  annuitants  in 
proportion  to  the  amount  of  their  donations  or  subscriptions,  according  to  Rule  No 
21. 

5.  Management.  —  That  this  branch  of  the  association  shall  be  conducted  by  the  same 
board  of  management  as  the  benefit  department. 

6.  Treasurer.  —  That  John  Abel  Smith,  Esq.,  M.  P.,  is  the  treasurer,  and,  by  virtue 
of  his  office,  is  also  a  member  of  the  board  of  management.    In  the  event  of  death  or 
resignation,  the  office  of  treasurer  to  be  filled  up  by  the  board. 

7.  Trustees.  —  That  there  shall  not  be  less  than  four  trustees,  and  the  funds  of  this 
association  shall  be  invested  in  the  names  of  two  or  more  of  the  trustees  for  the  time 
being.    The  present  trustees  are, — 

Thomas  Baring,  Esq. 

Thomson  Hankey,  jun.,  Esq. 

William  George  Prescott,  Esq. 

Baron  Lionel  de  Rothschild,  M.  P. 

And  in  case  of  death  or  resignation,  vacancies  to  be  filled  up  by  the  board,  subject  to 
the  approval  of  the  surviving  trustees ;  the  said  trustees,  by  virtue  of  their  office,  to  be 
members  of  the  board  of  management. 

8.  Auditors.  —  That  the  following  gentlemen  be  the  auditors  of  this  branch  of  the 
association,  viz. : — 

John  Beadnell,  Esq. 

James  William  Gilbart,  Esq.,  F.  R.  S. 

Sir  John  Pirie,  Bart.,  Aid. 

George  Pollard,  Esq. 

William  Smee,  Esq. 

any  two  being  competent  to  act,  who  shall  audit  the  annual  accounts,  to  be  laid  be- 
fore the  members  at  the  annual  general  meeting.  Vacancies  to  be  filled  up  by  the 
board. 

9.  Officers.  —  That  the  board  may  appoint  such  officers  to  this  branch  of  the  associa- 
tion as  may  be  deemed  necessary,  with  power  to  remove  them  and  to  appoint  others, 
and  to  fix  the  amount  of  their  respective  salaries  or  remuneration :  the  officers  to  give 
such  security  as  the  board  shall  require. 

10.  Expenses.  —  That  all  expenses  shall  be  equitably  divided  between  the  benefit  de- 
partment of  this  branch  of  the  association ;  and  the  proportion  to  be  borne  by  each 
shall  be  settled  by  the  board,  previously  to  making  up  the  annual  account. 

1 1 .  Special  Meeting  of  the  Board  of  Management.  —  That  a  special  meeting  of  the 
board  may  be  convened  on  any  emergency  by  a  requisition  to  the  chairman,  signed  by 
five  members  thereof;  the  requisition  to  state  the  object  of  such  special  meeting ;  and 
the  chairman  shall  call  such  meeting  within  one  week  of  receiving  the  requisition. 

12.  Annual  General  Meeting.  —  That  an  annual  general  meeting  of  the  members  of 
this  branch  of  the  association  be  held  in  February  in  each  year,  on  such  day  as  the 
board  may  appoint,  when  the  annual  report  of  the  state  of  the  funds,  together  with  the 
account  of  the  receipts  and  expenditure  of  the  past  year,  shall  be  laid  before  the  meet- 
ing.   In  case  of  any  questions  being  submitted  to  the  decision  of  such  meeting,  the 
same  to  be  decided  by  a  majority  of  votes. 

13.  Sjjecial  Meeting  of  Members.  —  That  a  special  meeting  of  members  may  be  con- 
vened by  a  requisition  to  the  chairman,  signed  by  thirty  members  at  the  least ;  the  re- 
quisition to  state  the  object  of  such  special  meeting ;  and  the  chairman  shall  call  such 
meeting  within  one  mouth  of  receiving  the  requisition. 

14.  Permanent  Fund. — That  the  sum  of  £  10,000  3  per  cent  stock,  now  invested,  or 

227 


A  TVeolwe  on  Banking. 

to  fJtjdvmViJt,  (hall  constitute  the  permanent  fund  of  this  branch  of  the  association,  and 
•kail  oo  no  acrount  be  reduced  below  that  amount. 

That  the  board  may  apply  the  interact  of  the  invested  fund,  together  with  sm-h  pro- 
portioa  of  the  annual  subscriptions  as  they  may  deem  fit  (after  payment  of  the  ex- 
penses), to  the  objects  of  the  association. 

That  the  farther  increase  of  the  permanent  fund  shall  be  at  the  discretion  of  the 
board,  except  that  the  amount  of  all  bequests,  together  with  the  proportion  of  the 
profit*  to  be  received  from  the  benefit  department  every  five  years,  shall  be  always 
added  ID  A*  invested  capital. 

I*.  GssMsty  /NNC/.  —  That  the  board  be  empowered  to  apportion  such  part  of  the 
available  income  of  this  branch  of  the  association  aa  may  be  deemed  expedient,  as  a 
caraalty  fund,  from  which  to  grant  temporary  relief  as  hereafter  mentioned. 

16.  Keitrf  —  That  no  member,  his  widow  or  family,  be  eligible  for  permanent  relief 
noli!  he  has  belonged  to  the  association  for  three  years,  unless  by  the  sanction  of  the 
annual  general  meeting. 

17.  Temporary  Relief.  — Th&t  temporary  relief  may  be  granted  from  the  casualty 
And  to  distressed  clerk*,  who  are  or  have  been  members,  their  widows,  or  families, — 
regard  being  had  in  all  cases  to  the  number  in  family,  and  the  length  of  time  the  party 
may  have  been  a  member  of  the  association,  —  as  follows  :  — 

First,  — By  loans,  on  the  security  of  two  responsible  persons,  or  other  sufficient  se- 
curity, of  sums  not  exceeding  £  10  at  one  time,  without  interest,  or  of  sums  above  £  10 
and  not  exceeding  X  25  with  interest,  to  be  repaid  by  quarterly  instalments,  within 
two  years. 

Secondly,  —  By  gratuities  of  sums,  not  exceeding  £10  at  one  time,  in  coses  of  long 
and  expensive  illness,  or  other  serious  calamity,  together  with  medical  assistance,  at 
the  discretion  of  the  board. 

Thirdly,  — By  weekly  allowances  of  sums  not  exceeding  at  the  rate  of  20  guineas 
per  annum,  nor  for  a  longer  period  at  any  one  time  than  six  months. 

Fourthly,  — By  weekly  allowances  to  orphan  children  of  deceased  members,  under 
fourteen  yean  of  age  (both  parents  being  dead),  the  amount  to  be  fixed  by  the  Ixmrd 
according  to  the  emergency  of  the  case,  but  in  no  instance  to  exceed  20  guineas  to  one 
family ;  and  such  allowance,  or  a  proportion  of  it,  to  cease  as  the  children  respectively 
attain  the  age  of  fourteen  yean. 

That  should  any  member  of  the  benefit  department,  who  was  a  clerk  at  the  time  of 
Us  entrance,  and  has  regularly  paid  his  premium  for  fire  yean  at  the  least,  be  unable, 
from  distress  or  otherwise,  to  continue  his  payments,  the  board  may  have  the  power, 
hi  their  discretion,  to  continue  the  payment  of  his  premiums  from  the  casualty  fund. 
by  way  of  loan  to  such  members,  upon  such  security  as  the  board  may  deem  fit ;  the 
polky  being  deposited  with  the  association,  and  any  bonus  declared  upon  such  policy 
beta*  first  applied  to  the  repayment  of  the  loan. 

li.  rtrmme*  Relitf.  —  That  permanent  relief  be  granted  by  way  of  annuity,  to  dis- 
•••§  (Jerks,  who  are  or  have  been  members  of  this  branch  of  the  association,  and 
•**  **•  «M  •••»  Nindaen,  or  other  infirmities,  are  rendered  incapable  of  obtaining 
' 

"**  **??"!*IB'1  *'uU  **  electe<*  b7  ballot,  as  appointed  by  the  subsequent  rules, 
Md  the  annuities  be  on  the  following  scale,  viz. :  — 

I/ been  a  member  3  to  10  years,      .        .        .        £25perannum. 

10  to  20  yean,          ...       SO          " 
"      » yean  and,  upwards,.        .  35          " 

898 


Banking  Documents. 

That  annuities  be  granted  to  widows  of  members  who  are  incapable  of  obtaining 
their  living,  on  the  following  scale,  viz. :  — 

If  husband  been  a  member  3  to  10  years,       .        .        .        £  15  per  annum. 
"  "10  to  20  years,          ...        20  " 

"  "        20  years  and  upwards,  25  " 

but  such  annuities  to  cease,  should  such  widow  marry  again. 

That  all  annuities  be  paid  quarterly. 

That  the  board  have  power  to  increase  or  decrease,  proportionately,  the  above  scales 
of  annuities,  according  to  the  amount  of  funds  at  their  disposal,  and  such  increase  or 
diminution  to  apply  equally  to  all  annuities  already  granted. 

That  should  it  come  to  the  knowledge  of  the  board  that  any  annuitant  has  been 
elected  by  fraud,  or  has  assigned  his  or  her  annuity,  or,  finally,  that  his  or  her  means 
of  living  has  improved,  so  as  not  to  require  the  aid  of  the  association,  the  board  shall 
have  the  power  to  suspend  the  payment  of  such  annuity,  or  to  reduce  the  same  as  they 
may  consider  fit. 

19.  Applications  for  Relief.- — That  applications  for  either  temporary  or  permanent 
relief,  be  made  according  to  such  forms  as  the  board  may  require ;  and  every  applicant 
must  be  recommended  by  two  respectable  parties,  who  are  acquainted  with  the  case ; 
that  applicants  for  annuities  must  send  in  their  testimonials  and  other  documents  at 
least  two  months  previous  to  the  election ;  and  any  wilful  misrepresentation  will  in- 
validate the  election  of  such  annuitant. 

That  the  board  shall  take  into  its  consideration  the  cases  of  the  various  applicants, 
and,  where  practicable,  make  personal  inquiries  into  the  truth  of  their  statements,  and 
select  such  as,  in  their  judgment,  are  eligible  to  be  balloted  for,  as  well  as  those  deserv- 
ing of  casual  relief. 

20.  Elections.  —  That  the  election  of  annuitants  shall  take  place  once  a  year,  or 
oftener,  at  the  discretion  of  the  board,  and  at  such  times  as  they  may  appoint. 

That  notice  shall  be  given  by  public  advertisement  or  otherwise,  of  the  number  of 
annuitants  to  be  elected ;  and  balloting  papers  be  issued  for  that  purpose,  with  a  list  of 
the  candidates. 

21.  Voting.  —  That  all  members,  defined  by  the  first  section  of  the  third  rule,  whose 
premiums  are  duly  paid,  shall  be  entitled  to  one  vote  for  each  annuitant  to  be  elected ; 
and  that  all  members  or  subscribers  who  have  given  a  donation  of  ten  guineas,  or  a 
subscription  of  one  guinea,  to  this  branch  (payable  annually  or  half-yearly),  be  entitled 
lo  one  vote  for  each  annuitant  to  be  elected,  and  an  additional  vote  for  every  additional 
donation  of  ten  guineas,  or  annual  subscription  of  one  guinea.     That  all  subscriptions 
in  arrears  must  be  paid  up  before  the  party  be  entitled  to  vote. 

That  clerks,  being  members  of  the  Benefit  Department,  as  well  as  subscribers  or 
donors  to  the  Benevolent  Fund,  be  entitled  to  vote  in  respect  of  both  qualifications. 

That  members  and  subscribers  may  give  all  their  votes  to  any  one  candidate,  or  di- 
vide them  as  they  please,  according  to  the  number  to  be  elected ;  they  may  vote  by 
proxy,  the  polling  paper  being  first  signed  by  them.  . 

That  in  the  event  of  an  equality  of  votes  for  any  two  candidates,  the  chairman  to 
give  the  casting  vote ;  and  should  any  dispute  arise  as  to  the  election  of  any  candidate, 
a  scrutiny  may  be  demanded  on  behalf  of  such  candidate,  provided  a  requisition,  signed 
by  six  members  or  subscribers  at  the  least,  be  addressed  to  the  chairman,  demanding 
such  scrutiny,  and  agreeing  to  pay  the  expenses  of  the  same. 

22.  Alteration  of  Rides.  —  That  none  of  the  foregoing  rules  be  altered,  amended,  or 
repealed,  unless  at  a  special  meeting  of  the  board  of  management,  convened  for  that 
purpose,  who.  being  so  assembled,  shall  have  power  to  alter,  amend,  or  repeal  any  of 

T  229 


A  Trtatitc  on  Banking. 


the  ralea,  and  rabstiiute  new  ones  in  lira  thereof  ;  bat  such  alterations,  amendment,  or 
NpMl  of  flriMt  or  substitution  of  new  one*,  shall  not  take  effect  unless  they  have  re- 
ceived the  sanction  of  the  annual  general  mooting,  or  of  a  special  general  meeting, 
ODBvroed  for  the  pnrpoM. 

S3,  &MBW  Bit—  That  a  book  shall  be  kept,  to  be  called  "  The  Situation  Book," 
in  which  the  members  who  are  out  of  employment  may  enter  their  names,  particulars 
of  their  former  employment,  and  the  nature  of  that  which  they  are  now  seeking. 
Thw  hook  to  be  open  for  the  gratuitous  inspection  of  merchants,  bankers,  and  others 


84.  fWw  »/  /hews*.  —  "  I  give  and  beqncathe  nnto  the  treasurer,  for  the  time  being, 
of  the  '  Provident  Clerks'  Mutual  Benefit  Association,'  in  trust  for  the  purposes  of  the 
Benevolent  Fund  of  that  Association,  the  sum  of  £  -  ,  to  be  paid  within 
-^—  —  months  next  after  my  decease,  out  of  such  part  of  my  personal  estate  as 
may  lawfully  be  bequeathed  and  appropriated  to  charitable  purpose!. 


XXII.  —  St.  Clement  Danes  Savings'  Bank  Government  Annuity  Insti- 
tution. 

Offict,  18,  SerlJt  Place,  two  doom  from  Carey  Street,  Lincoln' t  Inn,  London. 

• 

The  following  is  the  Government  Table,  and  shows  the  sum  required  to  be  paid  for 
an  Immediate  Annuity  of  Twenty  Pounds,  and  in  proportion  for  any  sum  not  lest 
than  4/.  nor  exceeding  30/.  per  annum :  — 

£      r  d. 

271     0  4 

265     1  4 
259     0    4 

252  18  11 

217     1  8 

241     5  11 

235  12  7 

230     1  5 

224  11  8 

219     3  8 

213  15  9 

208     6  2 

202  14  4 

196  17  5 

190  14  11 

184     8  0 
1 


AGE. 

£  ..  d. 

If  IS  and  under  16 

377  15  6 

16 

17 

374  4  1 

17 

18 

370  16  7 

18 

19 

367  14  6 

19 

20 

364  19  11 

to 

SI 

362  12  S 

SI 

22 

360  10  5 

M 

23 

359  0  4 

S3 

24 

357  12  6 

M 

25 

356  4  7 

• 

26 

354  15  3 

S6 

27 

353  3  0 

17 

M 

351  .1  8 

M 

u 

348  17  1 

S9 

30 

346  9  5 

80 

31 

343  18  10 

31 

• 

341  5  5 

as 

VI 

338  9  5 

S3 

34 

335  9  11 

34 

35 

332  6  9 

3ft 

36 

328  19  11 

M 

37 

325  9  11 

37 

M 

321  17  7 

M 

39 

318  2  11 

3* 

40 

314  6  7 

40 

41 

310  7  9 

41 

4S 

306  5  10 

41 

43 

801  18  6 

43 

44 

S97  7  10 

AA 

^* 

4ft 

S92  12  6 

4ft 

46 

S87  IS  6 

44 

47 

2*2  7  10 

47        48 

S76  16  0 

AGE. 

If  48  and  under  49 

49 

50 

50 

51 

51 

52 

52 

53 

53 

54 

54 

55 

55 

56 

56 

57 

57 

58 

58 

59 

59 

60 

60 

61 

61 

62 

62 

63 

63 

•it 

64 

65 

65 

66 

66 

67 

67 

68 

68 

69 

M 

70 

70 

71 

71 

72 

72 

73 

73 

74 

74 

75 

75 

76 

76 

77 

77 

78 

78 

79 

79    "    80 

178 

171  14 

165  7 

159  9 

153  12 

147  16 

142  2 

136  11 

131  3 

125  14 

120  1 

114  4 

108  4 

101  7 

94  11 

88  1 


90  or  any  greater  i 


81  14  10 


Banking  Documents. 

XXIII.  —  Comparative  View  of  the  Expectation  of  Life  according  to  the 
different  Tables  of  Mortality. 


Aim 

North- 

Carlisle Goverment  Annuitants. 

North- 

Carlisle GovernmentAnnuitanta. 

AgO. 

ampton. 

odnisie. 

Male. 

Female. 

Age. 

ampton. 

Male. 

Female. 

0 

25.18 

38.72 

50.16 

55.51 

40 

23.08 

27.61 

27.02 

31.12 

i 

32.74 

44.68 

50.13 

55.59 

41 

22.56 

26.97 

26.39 

30.46 

5 

40.84 

51.25 

48.93 

54.23 

42 

22.04 

26.34 

25.74 

29.81 

10 

39.78 

48.82 

45.57 

51.05 

43 

21.54 

25.71 

25.08 

29.14 

15 

36.51 

45.00 

41.76 

47.19 

44 

21.03 

25.09 

24.42 

28.48 

20 

33.43 

41.46 

38.39 

43.99 

45 

20.52 

24.46 

23.75 

27.81 

25 

30.85 

37.86 

35.90 

40.81 

50 

17.99 

21.11 

20.30 

24.35 

30 

28.27 

34.34 

33.17 

37.57 

55 

15.58 

17.58 

17.15 

20.79 

31 

27.76 

33.68 

32.59 

36.91 

60 

13.21 

14.34 

14.39 

17.32 

32 

27.24 

33.03 

32.00 

36.26 

65 

10.88 

11.79 

11.63 

14.00 

33 

26.72 

32.36 

31.40 

35.61 

70 

8.60 

9.18 

9.22 

10.99 

34 

26.20 

31.68 

30.79 

34.96 

75 

6.54 

7.01 

7.12 

8.46 

35 

25.68 

31.00 

30.17 

34.31 

80 

4.75 

5.51 

4.94 

650 

36 

25.16 

30.32 

29.54 

33.68 

85 

3.37 

4.12 

3.12 

4.84 

37 

24.64 

29.64 

28.91 

33.04 

90 

2.41 

3.28 

1.95 

2.83 

38 

24.12 

28.96 

28.28 

32.40 

95 

0.75 

3.53 

1.18 

1.55 

39 

23.60 

28.28 

27.65 

31.76 

100 

... 

2.28 

.  .. 

0.50 

PART    SECOND. 
OF  BANKING  INSTITUTIONS. 


I  Tn  B*»«  of  R»QUUrt»  —  II.  LONDON  PKIVATB  BANK*.  —  III.  JOINT-STOCK  BANKS  IN  LONDON.  — 
IT.  Conrrmr  PRIVATB  BANK*.  —  V.  COUNTRY  JOINT-STOCK  BANK*.  —  VI.  Tai  BANK*  OF 
•oeriAXD  —  VI!  T»»  BANK*  OP  IULAND. —  VIII.  MORAL  AND  RELIGIOUS  DUTIES  OF  BANKJNO 
CtMPAXiM.  —  IX.  TKN  Mixtrrm*1  ADVICB  ABOUT  KKKPINO  A  DANUBE. —  X.  SDMMART. 


SECTION  I.  — THE  BANK  OF  ENGLAND. 

THE  Act  of  Parliament  by  which  the  bank  was  established,  is  entitled 
**  An  Act  for  granting  to  their  Majesties,  several  duties  upon  tonnage  of 
•hips  and  vessels,  ana  upon  beer,  ale,  and  other  liquors,  for  securing  cer- 
tain recompenses  and  advantages  in  the  said  Act  mentioned,  to  such  per- 
sons as  shall  voluntarily  advance  the  sum  of  £  1,500,000  towards  carry- 
ing on  the  war  with  France."  After  a  variety  of  enactments  relative  to 
"  the  duty  upon  tonnage  of  ships  and  vessels,  and  upon  beer,  ale,  and 
other  liquors,"  the  Act  authorizes  the  raising  of  «£  1,200,000  by  volun- 
tary subscription,  the  subscribers  to  be  formed  into  a  corporation,  and  be 
styled,  u  The  Governor  and  Company  of  the  Bank  of  England."  The 
turn  of  £  300,000  was  also  to  be  raised  by  subscription,  and  the  contrib- 
utors to  receive  instead,  annuities  for  one,  two,  or  three  lives.  Towards 
the  £  14200,000  no  one  person  was  to  subscribe  more  than  £  10,000  be- 
fcjB  the  first  day  of  July  next  ensuing,  nor  at  any  time  more  than  £  20,- 
000.  The  corporation  were  to  lend  their  whole  capital  to  Government, 
for  which  they  were  to  receive  interest  at  the  rate  of  £  8  per  cent,  per 
annum,  and  £  4,000  per  annum  for  management ;  being  £  100,000  per 
annum  in  the  whole.  They  were  not  allowed  to  borrow  or  owe  more 
An  the  amount  of  their  capital ;  and  if  they  did  so,  the  individual  mem- 
bers became  liable  to  the  creditors,  in  proportion  to  the  amount  of  their 
•lock.  They  were  not  to  trade  in  any  "  goods,  wares,  or  merchandise 
whatsoever  *  ;  but  they  were  allowed  to  deal  in  bills  of  exchange,  gold  or 
silrer  bullion,  and  to  sell  any  goods,  wares,  or  merchandise,  upon  'which 
they  bad  advanced  money,  and  which  had  not  been  redeemed  witnin 
d*i*  month*  after  the  time  agreed  upon.  The  whole  subscription  hav- 
ing been  filled  in  ten  days,  a  charter  was  issued  on  the  27th  day  of  July, 
MM.  This  charter  has  been  repeatedly  renewed. 

' 


The  Bank  of  England. 

The  charter  granted  in  1708  prohibited  any  other  bank  having  more 
than  six  partners,  issuing  notes  in  any  part  of  England. 

The  charter  of  1833  continued  the  privileges  of  the  bank  until  the  ex- 
piration of  one  year's  notice,  to  be  given  within  six  months  after  the  ex- 
piration of  ten  years  from  August  1,  1834.  But  if  such  notice  should 
not  be  given,  then  the  charter  was  to  be  continued  until  the  expiration  of 
twelve  months'  notice,  to  be  given  after  the  1st  day  of  August,  1855. 

According  to  this  charter,  no  other  bank,  having  more  than  six  partners, 
can  issue  notes  payable  on  demand  in  London,  or  within  sixty-five  miles 
thereof.  Bank-notes  are  to  be  a  legal  tender,  except  at  the  bank  or 
branch  banks.  The  amounts  of  the  notes  in  circulation,  and  of  the  de- 
posits, and  of  the  bullion  and  securities  in  the  bank,  are  to  be  sent  weekly 
to  the  Chancellor  of  the  Exchequer  for  the  time  being.  These  accounts 
are  to  be  consolidated  every  month,  and  an  average  state  of  the  bank  ac- 
counts for  the  preceding  three  months  to  be  published  in  the  London  Ga- 
zette. Any  joint-stock  bank  that  does  not  issue  notes  may  carry  on  busi- 
ness in  London.  The  following  is  the  clause  relating  to  this  subject :  — 

"  And  whereas  the  intention  of  this  Act  is,  that  the  Governor  and  Company  of  the 
Bank  of  England  should,  during  the  period  stated  in  this  Act,  (subject,  nevertheless, 
to  such  redemption  as  is  described  in  this  Act,)  continue  to  hold  and  enjoy  all  the  ex- 
clusive privileges  of  banking  given  by  the  said  recited  Act  of  the  39th  and  40th  years 
of  the  reign  of  his  Majesty  King  George  III.  aforesaid,  as  regulated  by  the  said  recited 
Acts  of  the  7th  year  of  his  late  Majesty  King  George  IV.  or  any  prior  or  subsequent 
Act  or  Acts  of  Parliament,  but  no  other  or  further  exclusive  privilege  of  banking : 
And  whereas  doubts  have  arisen  as  to  the  construction  of  the  said  Acts,  and  as  to  the 
extent  of  such  exclusive  privilege,  and  it  is  expedient  that  all  such  doubts  should  be 
removed :  Be  it  therefore  declared  and  enacted,  that  any  body  politic  or  corporate,  or 
society,  or  company,  or  partnership,  although  consisting  of  more  than  six  persons,  may 
carry  on  the  trade  or  business  of  banking  in  London,  or  within  sixty-five  miles  there- 
of, provided  that  such  body  politic  or  corporate,  or  society,  or  company,  or  partnership, 
do  not  borrow,  owe,  or  take  up,  in  England,  any  sum  or  sums  of  money  on  their  bills 
or  notes  payable  on  demand,  or  at  any  less  time  than  six  months  from  the  borrowing 
thereof,  during  the  continuance  of  the  privileges  granted  by  this  Act  to  the  said  Gov- 
ernor and  Company  of  the  Bank  of  England." 

In  the  year  1844  the  bank  charter  was  again  renewed  until  the  expi- 
ration of  twelve  months  to  be  given  after  the  1st  day  of  August,  1855. 
The  following  are  the  principal  provisions  of  this  important  Act  (7  &  8 
Viet.  c.  32)  :  — 

Bank  to  establish  a  Separate  Department  for  the  Issue  of  Notes. 

"  I.  Whereas  it  is  expedient  to  regulate  the  issue  of  bills  or  notes  payable  on  de- 
mand :  and  whereas  an  Act  was  passed  in  the  fourth  year  of  the  reign  of  his  late 
Majesty  King  William  the  Fourth,  entitled  '  An  Act  for  giving  to  the  Corporation  of 
the  Governor  and  Company  of  the  Bank  of  England  certain  Privileges  for  a  limited 
Period,  under  certain  Conditions ' ;  and  it  is  expedient  that  the  privileges  of  exclusive 
banking  therein  mentioned  should  be  continued  to  the  said  Governor  and  Company 
of  the  Bank  of  England,  with  such  alteration  as  are  herein  contained,  upon  certain 
conditions  :  may  it  therefore  please  your  Majesty  that  it  may  be  enacted ;  and  be  it  en- 
acted by  the  Queen's  most  excellent  Majesty,  by  and  with  the  advice  and  consent  of 
the  Lords  Spiritual  and  Temporal,  and  Commons,  in  this  present  Parliament  assem- 
bled, and  by  the  authority  of  the  same,  t/tatfrom  and  afler  the  thirty-first  day  of  August, 
one  tfiousana  eight  hundred  and  forty-four,  the  issue  of  promissory  notes  of  the  Governor 
and  Company  of  the  Bank  of  England,  payable  on  demand,  shall  be  separated  and 
T*  233 


A  Treatue  on  Banking. 

kept  wholly  distinct  from  the  general  hanking  business  of  the  Raid  governor 
y  ;  and  the  boataeea  of  Mid  relating  to  such  issue  slmll  IK-  thrn«  forth  con- 
Mid  carried  on  by  the  Mid  governor  anil  company  in  a  separate  department.  «> 
be  called  'The  ISMM  Department  of  the  Hank  of  England,'  subject  to  the  rules  and 
refutation*  h«rrin»ftrr  contained  :  and  it  shall  bo  lawful  for  the  court  of  directors  of 
tbe  eatd  governor  and  company,  if  ther  vhall  think  tit,  to  appoint  acommittr.  , .1  .  ..m 
•feMe*  of  director*  (or  the  conduct  and  management  of  such  issue  di-jxiriinrnt  uf  tho 
;  of  Knciand.  and  from  time  to  time  to  remove  the  members,  and  define,  iilto  mid 


regvlate  tbe  constitution  and  powers  of  such  committee  as  they  Khali  think  tit,  sul>j«vt 
les,  or  regulations,  which  may  be  made  for  that  purp«>M-:  Provided, 


by-law*,  rales,  or  regulations, 
mid  utwt  depart 
•/*<*•  mid  governor  and  company. 

ofth  Tstve  by  Dank  of  England. 


to  any  by-law*,  rales,  or 

MvertbetoM.  that  tit  mid  utwt  department  thull  always  be  kept  separate  and  distinct  from 

•ll  «MftAy  flfOrtMl  •/*<* 


•  II.  And  be  it  enacted,  That  upon  the  thirty-first  day  of  August,  one  thousand 
e%bt  baodred  and  forty-four,  there  shall  be  transferred,  appropriated,  and  set  apart  by 
tbe  tkid  gorernor  and  company  to  the  issue  department  of  the  Bank  of  England  seen- 
rUes  to  the  value  of  fourteen  million  pounds,  whereof  the  debt  due  by  the  public  to  the 
said  governor  and  company  shall  be  and  be  deemed  a  part  ;  and  there  bhall  also  at  tho 
MM  tine  be  transferred,  appropriated,  and  set  apart  by  the  said  governor  and  com- 
pany to  tbe  said  issue  department  so  much  of  the  gold  coin  and  gold  and  silver  bullion 
then  held  by  the  Bank  of  England  as  shall  not  be  required  by  the  banking  department 
thereof;  and  thereupon  there  shall  be  delivered  out  of  the  said  issue  department  into 
ibe  amid  banking  department  of  the  Bank  of  England  such  an  amount  of  Bank  of 
England  notes  as,  together  with  the  Bank  of  England  notes  then  in  circulation,  shall 
be  equal  to  the  aggregate  amount  of  the  securities,  coin,  and  bullion  so  transferred  to 
tbe  Mid  issue  department  of  the  Bank  of  England  ;  and  the  whole  amount  of  the 
Bank  of  England  notes  then  in  circulation,  including  those  delivered  to  the  banking 
department  of  the  Bank  of  England  as  aforesaid,  shall  be  deemed  to  be  issued  on  the 
credit  of  such  securities,  coin,  and  bullion  so  appropriated  and  set  apart  to  the  said 
israe  department  ;  and  from  thenceforth  it  shall  not  be  lawful  for  the  said  governor 
and  company  to  increase  the  amount  of  securities  for  the  time  being  in  the  said  issue 
department,  sare  as  hereinafter  is  mentioned,  but  it  shall  be  lawful  for  the  said  governor 
and  company  to  diminish  the  amount  of  such  securities,  and  again  to  increase  the  same 
to  any  ram  not  exceeding  in  the  whole  the  sum  of  fourteen  million  pounds,  and  so  from 
tone  to  time  M  they  shall  see  occasion  ;  and  from  and  after  such  transfer  and  appro- 
priation to  the  said  issue  department  aa  aforesaid  it  shall  not  be  lawful  for  the  said 
governor  and  company  to  issue  Bank  of  England  notes,  cither  into  the  banking  de- 
partment of  the  Bank  of  England,  or  to  any  person  or  persons  whatsoever,  save  in  ex- 
change for  other  Bank  of  England  notes,  or  tor  gold  coin  or  for  gold  or  silver  bullion 
received  or  pun-hated  for  the  said  issue  department  under  the  provisions  of  this  Act, 
or  m  exchange  for  securities  acquired  and  taken  in  the  said  issue  department  under 
tbe  provision*  herein  contained  :  Provided  always,  that  it  shall  be  lawful  for  the  said 
governor  and  company  in  their  banking  department  to  issue  all  such  Bank  of  England 
note*  a»  tbey  shall  at  any  time  receive  from  the  said  issue  department  or  otherwise,  in 
•fri  tmm*  ••nnrr  in  all  respects  as  such  issue  would  be  lawful  to  any  other  person  or 

Proportion  of  Silver  Bullion  to  be  retained  in  the  Issue  Department. 

III.  And  whereas  it  is  necessary  to  limit  the  amount  of  silver  bullion  on  which  it 
•ball  be  lawful  for  tbe  issue  department  of  the  Bank  of  England  to  issue  Bank  of 
•Igi  •«>»  j  W  it  Undine  enacted,  That  it  shall  not  be  lawful  for  tho  Bank  of 
••mad  to  retain  in  the  issue  department  of  the  said  bank  at  any  one  time  an  amount 
4TaibwMMM«MjMfiH  one  fourth  part  of  the  gold  coin  and  bullion  at  such  time  held  by 
•a  Bank  of  England  in  tbe  issue  department. 

AO  Per***  may  demand  of  the  line  Department  Note*  for  Gold  Bullion. 

•IV.  And  be  it  enacted.  That  from  and  after  the  thirty-first  day  of  August,  one; 
mmmmmt  «fbt  baadred  and  forty-four,  all  persons  shall  be  entitled  to  deinund  from 


The  Bank  of  England. 

the  issue  department  of  the  Bank  of  England  Bank  of  England  notes  in  exchange  for 
gold  bullion,  at  the  rate  of  three  pounds  seventeen  shillings  and  ninepence  per  ounce  of 
standard  gold ;  Provided  always,  that  the  said  governor  and  company  shall  in  all 
cases  be  entitled  to  require  such  gold  bullion  to  be  melted  and  assayed  by  persons  ap- 
proved by  the  said  governor  and  company,  at  the  expense  of  the  parties  tendering  such 
gold  bullion. 

Power  to  increase  Securities  in  the  Issue  Department,  and  issue  additional  Notes. 

"  V.  Provided  always,  and  be  it  enacted,  That  if  any  banker  who  on  the  sixth  day 
of  May,  one  thousand  eight  hundred  and  forty-four,  was  issuing  his  own  bank  notes, 
shall  cease  to  issue  his  own  bank  notes,  it  shall  be  lawful  for  her  Majesty  in  Council,  at 
any  time  after  the  cessation  of  such  issue,  upon  the  application  of  the  said  governor 
and  company,  to  authorize  the  said  governor  and  company  to  increase  the  amount  of  se- 
curities in  the  said  issue  department  beyond  the  total  sum  or  value  of  fourteen  million 
pounds,  and  thereupon  to  issue  additional  Bank  of  England  notes  to  an  amount  not 
exceeding  such  increased  amount  of  securities  specified  in  such  Order  in  Council,  and 
so  from  time  to  time :  Provided  always,  that  such  increased  amount  of  securities  speci- 
fied in  such  Order  in  Council  shall  in  no  case  exceed  the  proportion  of  two  thirds  the 
amount  of  bank  notes  which  the  banker  so  ceasing  to  issue  may  have  been  authorized  to 
issue  under  the  provisions  of  this  Act ;  and  every  such  Order  in  Council  shall  be  pub- 
lished in  the  next  succeeding  London  Gazette. 

Account  to  be  rendered  by  the  Bank  of  England. 

"  VI.  And  be  it  enacted,  That  an  account  of  the  amount  of  Bank  of  England  notes 
issued  by  the  issue  department  of  the  Bank  of  England,  and  of  gold  coin,  and  of  gold 
and  silver  bullion  respectively,  and  of  securities  in  the  said  issue  department,  and  also 
an  account  of  the  capital  stock,  and  the  deposits,  and  of  the  money  and  securities  be- 
longing to  the  said  governor  and  company  in  the  banking  department  of  the  Bank  of 
England,  on  some  day  in  every  week,  to  be  fixed  by  the  Commissioners  of  Stamps 
and  Taxes,  shall  be  transmitted  by  the  said  governor  and  company  weekly  to  the  said 
commissioners  in  the  form  prescribed  in  the  schedule  hereto  annexed  marked  (A),  and 
shall  be  published  by  the  said  commissioners  in  the  next  succeeding  London  Gazette  in 
which  the  same  may  be  conveniently  inserted. 

Bank  of  England  exempted  from  Stamp  Duty  upon  their  Notes. 

"  VII.  And  be  it  enacted,  That  from  and  after  the  said  thirty-first  day  of  August, 
one  thousand  eight  hundred  and  forty-four,  the  said  governor  and  company  of  the 
Bank  of  Englana  shall  be  released  and  discharged  from  the  payment  of  any  stamp  duty, 
or  composition  in  respect  of  stamp  duty,  upon  or  in  respect  of  their  promissory  notes 
payable  to  bearer  on  demand  ;  and  all  such  notes  shall  thenceforth  be  and  continue 
free  and  wholly  exempt  from  all  liability  to  any  stamp  duty  whatsoever. 

Bank  to  allow  £180,000  per  Annum. 

"  VIII.  And  be  it  enacted,  That  from  and  after  the  said  thirty-first  day  of  August,  one 
thousand  eight  hundred  and  forty-four,  the  payment  or  deduction  of  the  annual  sum  of 
one  hundred  and  twenty  thousand  pounds,  made  by  the  said  governor  and  company 
under  the  provisions  of  the  said  Act,  passed  in  the  fourth  year  of  the  reign  of  his  late 
Majesty  King  William  the  Fourth,  out  of  the  sums  payable  to  them  for  the  charges  of 
management  of  the  public  unredeemed  debt,  shall  cease,  and  in  lieu  thereof  the  said 
governor  and  company,  in  consideration  of  the  privileges  of  exclusive  banking,  and 
the  exemption  from  stamp  duties,  given  to  them  by  this  Act,  shall,  during  the  continu- 
ance of  such  privileges  and  such  exemption  respectively,  but  no  longer,  deduct  and 
allow  to  the  public,  from  the  sums  now  payable  by  law  to  the  said  governor  and  com- 
pany for  the  charges  of  management  of  the  public  unredeemed  debt,  the  annual  sum  of 
one  hundred  and  eighty  thousand  pounds,  any  thing  in  any  Act  or  Acts  of  Parliament,  or 
in  any  agreement,  to  the  contrary  notwithstanding :  Provided  always,  that  such  deduc- 
tion shall  in  no  respect  prejudice  or  affect  the  rights  of  the  said  governor  and  company 
to  be  paid  for  the  management  of  the  public  debt  at  the  rate  and  according  to  the 

235 


A  Trealue  on  Banking. 

mrms  aiuiided  hi  M  aot  named  In  the  forty-eighth  year  of  the  reign  of  his  late  Majesty 
King  George  the  Third,  entitled  •  An  Act  to  authorize  the  advancing  for  the  PuMic 
Street  matm  certain  Conditions,  a  Proportion  of  the  Balance  remaining  in  the  Hank 
of  BngiandTfor  the  Payment  of  Unclaimed  Dividends,  Annuities,  and  Lottery  Prizes, 
and  for  regulating  the  Allowance*  to  be  made  for  the  Management  of  the  National 

BB 

Btmk  to  allow  la*  Public  the  Profit  of  increased  Circulation. 

UIX.  And  be  it  enacted,  That  in  case,  under  the  provisions  hereinbefore  contained 
the  securities  httd  in  the  said  issue  department  of  the  Bank  of  England  shall  at  any 
time  be  increased  bevond  the  total  amount  of  fourteen  million  pounds,  then  and  in 
each  and  •wry  rear  in  which  the  same  shall  happen,  and  so  long  as  such  increase 
shaU  eocuinne,  the  said  governor  and  company  shall,  in  addition  to  the  said  annual 
mm**  of  one  hundred  and  eighty  thousand  pounds,  make  a  further  payment  or  allow- 
i  to  the  public,  equal  in  amount  to  the  net  profit  derived  in  the  taut  issue  dejxtrtmtnt 
"•  CMTllMf  mwyfa*  such  additional  securities,  after  drdin-tim,'  the  amount  of  the 
t  occasioned  by  the  additional  issue  during  the  some  period,  which  expense* 
include  the  amonnt  of  any  and  every  composition  or  payment  to  be  made  l>v  the 
Mid  «OTeroor  and  company  to  any  banker  in  consideration  of  the  discontinuance  at  any 
time  hereafter  of  the  issue  of  bank  notes  by  such  banker ;  and  such  further  payment  or 
allowance  to  the  public  by  the  said  governor  and  company  shall,  in  every  year  while 
the  public  shall  be  entitled  to  receive  the  same,  be  deducted  from  the  amount  by  law 
parable  to  the  said  governor  and  company  for  the  charges  of  management  of  the  unre- 
deemed public  debt,  in  the  same  manner  as  the  said  annual  sum  of  one  hundred  and 
eifhty  ntnnmnd  pounds  i*  hereby  directed  to  be  deducted  therefrom." 

Dank  to  enjoy  Privileges  subject  to  Redemption. 

u  XX  VII.  And  be  it  enacted,  That  the  said  Governor  and  Company  of  the  Bank  of 
P-jf-**  shall  have  and  enjoy  such  exclusive  privilege  of  banking  as  is  given  by  this 
Act,  upon  such  terms  and  conditions,  and  subject  to  the  termination  thereof  at  such 
time  and  in  such  manner  as  is  by  this  Act  provided  and  specified  ;  and  all  and  every 
the  powers  and  authorities,  franchises,  privileges,  and  advantages,  given  or  recogni/ed 
by  the  said  recited  Act  passed  in  the  fourth  year  of  the  reign  of  his  Majesty  King  Wil- 
liam the  Fourth,  as  belonging  to  or  enjoyed  by  the  said  Governor  and  Company  of  the 
Bank  of  *H****.  or  by  any  subsequent  Act  or  Acts  of  Parliament,  shall  be  and  the 
same  an  hereby  declared  to  be  in  full  force,  and  continued  by  this  Act,  except  so  far 
M  the  same  are  altered  by  this  Act;  subject  nevertheless*  to  redemption  upon  the  terms 
and  conditions  following ;  that  is  to  say,  at  any  time  vpon  twelve  months'  notice  to  be 
fin*  after  the  first  day  ofAwfttst,  one  thousand  eight  hundred  and  fifty-five,  and  upon  re- 
payment by  Parliament  to  the  said  governor  and  company  or  their  successors  of  the 
•um  of  eleven  million  fifteen  thousand  and  one  hundred  pounds,  being  the  debt  now 
due  from  the  public  to  the  said  governor  and  company,  without  any  deduction,  dis- 
count, or  abatement  whatsoever,  and  upon  payment  to  the  said  governor  and  compar- 
and their  successors  of  all  arrears  of  the  sum  of  one  hundred  thousand  pounds  per  an- 
"•"i,  in  the  last-mentioned  Act  mentioned,  together  with  the  interest  or  annuities  pay- 
able noon  the  mid  debt  or  in  respect  thereof,  and  also  upon  repayment  of  all  the  prin- 
cipal and  interest  which  shall  be  owing  unto  the  said  governor  and  company  and  their 
••eomsors  upon  all  such  tallies,  exchequer  orders,  exchequer  bills,  or  parliamentary 
fc*d*wh»eh  the  said  governor  and  company  or  their  successors  shall  have  remaining 
in  their  hands  or  be  entitled  to  at  the  time  of  such  notice  to  be  given  as  last  aforesaid, 
thMimi  hi  such  case,  and  not  till  then,  the  said  exclusive  privileges  of  banking 
C******  by  this  Act  shall  cease  and  determine  at  the  expiration  of  such  notice  of  twelve 
months ;  ami  any  vote  or  resolution  of  the  House  of  Commons,  signified  under  the 
"•dof  the  Speaker  of  the  said  house  in  writing,  and  delivered  at  the  public  office  of 
ha  said  governor  and  company,  shall  be  deemed  and  adjudged  to  be  a  sufficient  no- 

We  hare  noticed  the  provisions  of  this  Act  in  a  former  part  of  our 

Ml 


The  Bank  of  England. 

work.     We  shall  here  only  give  a  summary  of  the  business  operations  of 
the  bank. 

The  Bank  of  England  is  a  bank  of  issue.  She  can  issue  to  the  extent 
of  £  14,000,000  against  that  amount  of  securities  set  apart  for  that  pur- 
pose. She  can  issue  to  any  further  amount'  against  lodgments  of  gold 
and  silver,  as  regulated  by  the  above  Act.  This  amount  of  £  14,000,000 
may  be  issued  either  at  the  office  in  London  or  at  the  branches.  Were 
she  to  reduce  the  number  of  her  branches  she  would  not  be  required  to 
issue  less  than  this  £  14,000,000 ;  and  were  she  to  increase  her  branches, 
she  could  issue  no  more.  If  other  banks  discontinue  their  circulation,  she 
may  upon  application  receive  permission  to  extend  her  issues  to  two  thirds 
the  sum  thus  withdrawn  ;  but  all  the  profit  of  this  increase  must  go  to  the 
Government.  She  cannot  issue  any  note  for  a  less  amount  than  five 
pounds.  All  the  notes  are  payable  in  gold  on  demand.  The  payment 
of  those  issued  in  London  can  be  demanded  only  at  the  London  office. 
But  the  payment  of  those  issued  at  the  branches  may  be  demanded  either 
at  the  London  office  or  at  the  branches  where  they  were  respectively  is- 
sued. Bank  of  England  notes  are  a  legal  tender  in  all  cases,  except 
when  tendered  by  the  bank  herself. 

The  Bank  of  England  is  also  a  Bank  of  deposit,  of  loan,  and  of  dis- 
count. She  allows  no  interest  on  any  portion  of  her  deposits,  nor  per- 
mits any  account  to  be  overdrawn.  She  charges  various  rates  on  the 
bills  she  discounts,  but  does  not  go  below  the  rate  she  announces  to  be 
her  minimum.  She  does  not  act  as  the  London  agent  of  country  banks  ; 
but  is  the  agent  of  the  Bank  of  Ireland,  and  the  Royal  Bank  of  Scotland. 
She  does  not  accept  any  bills  that  may  be  drawn  by  those  banks,  or  by 
her  own  branches,  —  they  are  all  drawn  without  acceptance.  She  does 
not  issue  any  circular  notes  on  foreign  countries,  nor  grant  letters  of 
credit  on  foreign  banks.  She  remits  money  to  and  from  her  branches, 
and  from  one  branch  to  another.  She  issues  at  the  London  office  bank- 
post  bills,  drawn  at  seven  days'  sight. 

The  Bank  of  England  is  also  the  banker  of  the  Government.  She  has 
always  a  large  amount  of  public  deposits,  on  which  she  allows  no  interest. 
She  receives  the  public  revenue,  and  pays  the  dividends  on  the  National 
Debt. 

The  profits  of  the  bank  are  derived  from  hex  capital,  her  rest,  public 
and  private  deposits,  the  seven-day  bills,  her  agencies,  and  her  circulation. 
From  these  funds  she  makes  investments  in  public  securities  and  private 
securities.  These  bring  dividends  and  interest.  She  also  has  a  profit  on 
the  £  14,000,000  of  notes  in  circulation.  This  profit  is  the  difference  be- 
tween the  expense  of  maintaining  the  circulation,  and  the  interest  re- 
ceived on  the  securities  set  apart  to  meet  this  circulation..  The  bank  has 
an  annual  payment  from  the  Government  for  managing  the  National 
Debt.  She  also  receives  a  commission  from  those  banks  to  which  she  is 
the  London  agent.  A  profit  is  also  obtained  on  bullion  transactions.  The 
bank  buys  gold  at  £  3  17s.  9<Z.  an  ounce  and  sells  it  at  £  3  17s.  \Q\d.  an 
ounce.  Against  these  profits  the  bank  has  to  place  the  expense  of  con- 
ducting the  establishment,  and  the  losses  incurred  by  bad  debts,  forgeries, 
and  unfortunate  investments. 

237 


A    Treatue  on  Banking. 

Tkt  Branches  of  the  Bank  of  England. 

The  Act  of  1886,  which  permitted  the  formation  of  joint-stock  banks  in 
England,  al«o  authorized  the  Hank  of  England  to  establish  brunches  in 
the  provincial  towns.  Their  mode  and  terms  of  transacting  business  were 
thus  described  at  the  timi-  in  a  Welsh  w\vs|>;i|>«>r,  called  the  Cambrian:  — 

•  The  brunch  bank  u  to  be  a  secure  place  of  deposit  for  persons  having  occasion  to 
make  a«e  of  a  bank  for  that  purpose  ;  such  accounts  are  termed  drawing  accounts.  The 
facility  to  the  mercantile  and  trading  classes  of  obtaining  discounts  of  good  and  unex- 
ceptionable bill*,  bonded  upon  real  transactions,  two  approved  names  being  required 
•poa  every  bill  or  note  discounted ;  these  are  called  ditcount  accounts.  The  application 
of  parties  who  desire  to  open  discount  accounts  at  the  branch,  are  forwarded  every 
Saturday  to  the  parent  establishment  for  approval,  and  an  answer  is  generally  received 
in  about  ten  days.  When  approved,  good  bills  may  be  discounted  at  the  branch  with- 
oat  farther  reference  to  London.  Bills  payable  at  Swansea,  London,  or  any  other 
place  where  a  branch  is  established,  are  discounted  under  this  regulation.  The  divi- 
doads  on  aay  of  the  public  funds,  which  ore  payable  at  the  Bank  of  England,  may  be 
received  at  the  branch  here,  by  parties  who  have  opened  '  drawing  accounts,'  after  sign- 
ing powers  of  attorney  for  that  purpose,  which  the  branch'  will  procure  from  London. 
No  charge  U  made  in  this  case,  except  the  expense  of  the  power  of  attorney  and  its 
portage.  Purchases  and  sales  of  every  description  of  Government  securities  arc  effect- 
ed by  the  branch  at  a  charge  of  one  quarter  per  cent.,  which  includes  brokerage  in 
London,  and  all  expenses  of  postage,  &c.  A  charge  of  one  quarter  per  cent,  is  also 
i  oa  paying  at  the  Bank  of  England,  bills  accepted  by  persons  having  drawn  ac- 
i  at  Swansea,  such  bills  to  be  advised  by  the  branch ;  also  for  collecting  payment 
of  bills  at  the  other  branches,  and  on  granting  letters  of  credit  on  London,  or  on  the 
other  branches.  The  branch  grants  bills  on  London,  payable  at  twenty-one  days'  date 
without  acceptance,  for  sums  of  ten  pounds  and  upwards.  Persons  having  drawing 
accounts  at  Swansea,  may  order  money  to  be  paid  at  the  bank  in  London,  to  their 
credit  at  this  place,  and  vice  cersd,  without  any  expense.  The  branch  may  be  called 
•poo  to  change  any  notes  issued  and  dated  at  Swansea,  hut  they  do  not  change  the 
note*  of  the  bank  in  London,  nor  receive  them  in  payment,  unless  as  a  matter  of  cour- 
tesy when  the  parties  are  known.  Bank  post  bills  which  are  accepted  and  due,  are 
received  at  the  branch  from  parties  having  drawing  accounts,  and  taken  to  account 
without  any  charge  for  postage ;  but  unaccepted  bank  post  bills,  which  must  be  sent 
to  London,  are  subject  to  the  charge  of  postage,  and  taken  to  account  when  due.  No 
interest  is  allowed  on  deposits.  No  advance  is  made  by  the  branch  upon  any  descrip- 
tion of  landed  or  other  property,  nor  is  any  account  allowed  to  be  overdrawn.  The 
notrs  of  Mesm.  Walter's  Bank  at  this  place,  of  Messrs.  Williams  &  Rowland,  Ncuth 
Beak,  and  of  the  Brecon  Old  Bank,  are  received  in  payment  at  the  branch.  Any 
other  eoontry  bankers  may  open  an  account  for  the  like  purpose.  The  notes  are  the 
sasM  as  those  issued  by  the  parent  establishment,  except  being  dated  Swansea,  and 
made  payable  there  and  in  London.  No  note  issued  exceeds  the  sum  of  £500,  and 
nooe  are  for  a  less  amount  than  £  5." 

The  Bank  of  England  has  opened  fourteen  branches.  But  the  Exeter 
branch  was  removed,  in  the  year  1844,  to  Plymouth ;  and  the  Gloucester 
branch  has  recently  been  closed.  The  following  tables  will  show  the  cir- 
culation in  notes,  and  bank  post  bills,  of  each  branch :  — 

238 


The  Bank  of  England. 


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239 


A  Treatise  on  Banking. 

branch  has  recently  been  closed.  At  one  timo  the 
ire  Banking  Company  issued  only  the  notes  of  this  branch  ; 
but  previous  to  1844,  they  resumed  the  circulation  of  their  own  notes, 
and  hence  in  the  years  1843,  and  1844,  the  circulation  of  this  branch  de- 
clined. Whether  it  be  from  this  cause,  or  from  the  operation  of  the  Act 
of  1844,  that  the  branch  has  been  discontinued,  we  do  not  know.  It  is 
clear,  that  under  this  Act,  the  Bank  of  England  has  few  motives  for  ex- 
tending  her  branches.  She  cannot  increase  her  circulation  of  notes  ex- 
cept under  ftptffiHil  circumstances,  and  then  all  the  profit  must  go  to  the 
Government 

The  Bank  of  England  consented  to  establish  branches  in  the  year 
1836,  at  the  suggestion  of  Lord  Liverpool,  in  order  to  extend  to  the  prov- 
ince* the  advantage  of  a  secure  circulation.  This  was  considered  the 
grand  desideratum  at  that  time,  in  consequence  of  the  numerous  failures 
that  had  recently  taken  place  among  the  country  bankers.  This  object 
WM  flflfeclodt  and  effected  with  greater  facility,  in  consequence  of  the 
establishment  of  joint-stock  bonks,  who  made  arrangements  for  issuing 
Bank  of  England  notes. 

These  branches  were  not  merely  banks  of  circulation.  They  were 
banks  of  deposit,  of  discount,  and  of  remittance.  In  these  respects  they 
came  into  competition  with  the  country  bankers.  This,  in  some  cases 
reduced  the  charges  previously  mode  on  banking  transactions.  As  banks 
of  discount,  they  charged  the  same  rate  which  was  charged  at  the  London 
office, — a  charge  usually  below  that  of  the  country  banks.  As  banks 
of  remittance,  they  granted  letters  of  credit  at  a  shorter  tenn«  As  banks 
of  deposit,  they  charged  no  commission.  But,  on  the  other  hand,  they 
allowed  no  interest  on  the  balance,  and  they  allowed  no  account  to  be 
overdrawn  ;  and  they  would  not  receive  from  their  depositors  any  country 
notes,  unless  the  banks  had  previously  opened  an  account  with  them,  and 
made  a  lodgment  to  meet  their  notes. 

While,  therefore,  the  branches  have  obtained  a  large  circulation,  and 
hare  transacted  a  good  business  as  banks  of  discount  and  of  remittance, 
they  have  not  made  much  progress  as  banks  of  deposit.  The  deposits  at 
all  the  branches  amount  to  only  ;£  1,200,000.  When  it  is  considered  that 
the  branches  are  established  in  large  towns,  and  that  many  of  them  have 
existed  for  above  twenty  years,  this  amount  is  far  from  considerable. 

Here  is  another  anomaly  of  the  Act  of  1844.  The  Bank  of  England 
m  placed  in  a  position  in  which  it  is  her  interest  to  withdraw  some  of  her 
branches.  At  the  same  time,  the  banks  of  issue  in  the  neighbourhood 
of  those  branches  are  not  allowed  to  extend  their  issues  so  as  to  fill  up 
the  vacuum  which  is  thus  occasioned  in  the  amount  of  the  local  circu- 


Tke  Law*  of  the  Currency  with  Reference  to  the  Bank  of  England, 

la  March,  1841,  I  was,  at  the  request  of  the  joint-stock  banks,  ex- 
amined as  a  witness  before  a  Select  Committee  of  the  House  of  Com- 
rooos  "appointed  to  inquire  into  the  effects  produced  on  the  circulation  of 
A*  OOOBtry  by  the  various  banking  establishments  issuing  notes  payable 

•-MO 


The  Bank  of  England. 

on  demand."  The  charge  advanced  at  the  time  against  the  issuing  joint- 
stock  banks,  and  generally  against  all  banks  of  issue  was,  that  they  did 
not  make  the  amount  of  their  circulation  correspond  with  the  amount  of 
the  circulation  of  the  Bank  of  England.  With  reference  to  this  accusa- 
tion, I  laid  before  the  committee  a  variety  of  tables,  designed  to  show  the 
laws  which  regulated  the  circulation  of  the  Bank  of  England,  of  the 
country  banks,  of  the  banks  of  Ireland  and  of  Scotland,  respectively. 
The  inference  was  designed  to  show  that  no  correspondence  could  exist 
between  the  circulation  of  these  several  banks.  These  tables  cannot  be 
introduced  here.  But  the  following  is  a  summary  of  my  evidence  on 
this  subject,  taken  from  an  article  on  "  The  Laws  of  the  Currency," 
which  I  published  in  the  "  Foreign  and  Colonial  Review "  of  April, 
1844:  — 

"  We  have  before  us  two  reports  from  the  Committee  on  Banks  of 
Issue,  laid  before  the  House  of  Commons  in  the  years  1840  and  1841. 
The  committee  report  the  evidence,  and  abstain  from  giving  any  opinion 
upon  the  great  questions  involved  in  the  inquiry.  They,  however,  recom- 
mended the  passing  of  the  Act  4  &  5  Viet.  c.  50,  requiring  a  monthly 
registry  of  the  circulation  of  the  Bank  of  England,  and  of  the  other 
banks  of  issue,  with  the  amount  of  bullion,  to  be  published  in  the  Royal 
Gazette.  It  may  therefore  be  expected,  that,  in  a  course  of  years,  a  suf- 
ficient number  of  facts  will  be  recorded  to  enable  future  generations  to 
form  '  well-grounded  opinions  '  on  this  important  subject. 

"  In  the  mean  time  we  will  make  use  of  the  information  we  already 
possess.  We  will  take  the  monthly  returns  of  the  circulation  for  the 
period  that  is  past,  that  is,  from  September  1833  to  the  end  of  1843,  and 
endeavour,  by  observing  their  various  revolutions,  to  discover  if  they  are 
governed  by  any  fixed  causes  or  principles,  —  to  ascertain  if  those  prin- 
ciples are  uniform  in  their  operation  ;  and  if  we  should  discover  that  the 
revolutions  of  the  currency  are  regulated  by  any  uniform  principles,  we 
shall  call  those  principles  the  Laws  of  the  Currency. 

"  We  shall  begin  with  that  portion  of  the  currency  which  consists  of 
notes  issued  by  the  Bank  of  England.  On  looking  over  the  monthly  cir- 
culation of  the  Bank  of  England,  given  in  the  Table,  No.  34,  in  the  Ap- 
pendix to  the  Report  of  1840,*  we  observe,  that  the  circulation  of  the 
months  in  which  the  public  dividends  are  paid  is  higher  than  in  the  sub- 
sequent months.  Thus,  the  average  circulation  of  January  is  higher  than 
that  of  February  or  March.  The  circulation  of  April  is  higher  than  that 
of  May  or  June.  The  circulation  of  July  is  higher  than  that  of  August 
or  September.  And  the  circulation  of  October  is  higher  than  that  of  No- 
vember or  December.  This,  then,  we  may  consider  as  one  law  of  the 
circulation  of  the  Bank  of  England,  —  that  it  ebbs  and  flows  four  times 
in  the  year,  in  consequence  of  the  payment  of  the  quarterly  dividends. 
This  law  does  not  apply  to  any  other  bank,  as  all  the  Government  divi- 
dends are  paid  by  the  Bank  of  England. 

"  Again,  the  purchase  and  sale  of  Government  stock  and  exchequer 

*  This  table,  extended  to  the  latest  return,  is  published  in  the  Banking  Almanac 
for  1849,  p.  24.     It  will  be  seen  that  the  laws  of  the  circulation  of  the  Bank  of  Eng- 
land remain  the  same  as  before  the  passing  of  the  Act  of  1844. 
u  241 


A  Treatise  on  Banting. 

bills  by  the  Rank  of  Englnn<l  affects  the  amount  of  her  circulation.  If 
the  bank  purchase  Government  sti»-k  or  evhequer  hills,  sho  pays  for 
them  in  her  own  notes,  and  thus  increases  her  circulation.  If,  on  the 
other  hand,  the  sell  Government  stock  or  exchequer  bills,  she  receives 
payment  in  her  own  notes,  and  thus  her  circulation  is  diminished.  An- 
other law,  then,  and  one  peculiar  to  the  Bank,  of  England  is,  thut  her 
circulation  H  affected  by  the  purchases  and  sales  of  Government  se- 
curities. 

"  As  the  payment  of  the  public  dividends  puts  into  circulation  the  notes 
of  the  bank,  the  receipt  of  the  public  revenue  will  of  course  withdraw 
her  note*  from  circulation.  A  large  amount  of  the  public  revenue  is 
Mid  at  the  latter  part  of  the  year,  and  this  probably  is  the  main  cause 
why  the  amount  of  the  Bonk  of  England  circulation  is  always  the  lowest 
in  the  month  of  December.  Although  the  circulation  ebbs  and  flows  four 
ItnfrMi  in  the  year,  yet  the  December*  point  is  always  the  lowest  point 
throughout  the  year ;  and  this  is  the  case  in  every  year,  although  the 
P*nV  of  England  is  always  open  in  December  for  short  loans,  the 
granting  of  which  increases  her  circulation.  This,  then,  is  another  law 
of  the  circulation. 

M  If  the  bank  purchase  bullion  with  her  notes,  that  will  of  course  in- 
crease her  circulation ;  if  she  sell  bullion,  that  will  diminish  her  circula- 
tion ;  and,  as  the  bonk  is  always  open  for  the  purchase  of  bullion  at  a  fixed 
price,  and  as  gold  may  at  all  times  be  withdrawn  from  her  in  payment 
of  her  notes,  her  circulation  is  subject  to  considerable  fluctuation  from 
this  cause.  There  is  not,  however,  any  uniform  correspondence  between 
the  amount  of  her  circulation!  and  the  amount  of  her  bullion  ;  for  when 
she  pays  the  public  dividends,  she  increases  her  notes,  but  diminishes  her 
bullion ;  and  when  she  receives  the  public  revenue,  as  in  December,  her 
circulation  is  diminished,  but  the  bullion  is  increased.  These  contrary 
fluctuations  are  occasioned  by  that  portion  of  our  currency  which  is  under 
£b  consisting  of  the  precious  metals ;  but  they  do  not  impugn  the  law 
which  states  that  the  purchase  of  gold  increases,  and  the  sale  of  gold  di- 
minishes, the  amount  of  her  circulation. 

u  We  have  thus  traced  those  peculiar  laws  which  regulate  the  monthly 
revolutions  of  the  circulation  of  the  Bonk  of  England.  We  shall  now 
proceed  to  its  annual  revolutions. 

u  Any  of  the  causes  of  the  monthly  fluctuations  of  the  circulation  of 
the  Bank  of  England,  if  called  into  operation  more  in  one  year  than  in 
another,  may  become  causes  of  annual  fluctuations.  But  the  most  uni- 
form and  permanent  cause  of  annual  fluctuation  appears  to  be  made  by 
the  purchases  and  sales  of  bullion.  The  word '  bullion,'  in  the  bank  returns, 
means  gold  and  silver,  whether  coined  or  uncoined,  and  whether  lying  at 
the  head  office  or  at  the  branches.  When  the  foreign  exchanges  are  in 

*  There  WM  am  exception  to  this  law  in  December,  1843,  in  consequence  of  the 
call.nff  10  of  the  light  wVereiffni. 

*•>  i>B«i*eircmlaiioB*  means  of  coarse  the  amount  of  notes  in  the  hands  of  the 
8fae»  the  patting  of  the  Act  of  1844,  the  word  has  been  nometimes  nued  in  a 
teat*,  M  M  to  include  also  the  notes  in  the  banking  department  of  the 

242 


The  Bank  of  England. 

favor  of  this  country,  bullion  is  imported  and  sold  to  the  Bank  of  Eng- 
land ;  and  when  the  exchanges  are  unfavorable,  gold  is  exported,  and 
the  exporters  obtain  the  gold  from  the  Bank  of  England,  either  by  pur 
chase  or  by  demanding  payment  of  her  notes.  In  most  cases,  however, 
the  circulation  does  not  fluctuate  so  much  as  the  bullion.  For  when  notes 
are  issued  against  a  large  importation  of  bullion,  money  becomes  abun- 
dant and  cannot  be  employed,  and  hence  it  is  lodged  by  bankers  and  others 
in  the  Bank  of  England,  on  deposit.  But  so  long  as  the  bank  keeps  her 
securities  of  the  same  amount,  the  increase  of  the  bullion  will  always  be 
about  equal  to  the  increase  of  the  circulation  and  the  deposits  added  to- 
gether. And,  on  the  other  hand,  when  an  adverse  exchange  draws  bul- 
lion from  the  bank,  the  deposits  decrease  as  well  as  the  circulation ;  and 
the  decrease  in  both  together  will  be  equal  to  the  amount  of  gold  with- 
drawn ;  that  is,  supposing  the  securities  to  remain  the  same. 

"  By  '  securities '  is  meant  Government  stock,  exchequer  bills,  loans, 
discounted  bills,  or  any  thing  else  on  which  the  bank  may  have  advanced 
money.  It  is  a  principle  of  management  by  the  bank,  to  keep  the  total 
amount  of  their  securities  equal,  or  nearly  so  ;  and  so  long  as  this  rule  is 
acted  upon,  the  tendency  of  exportations  or  importations  of  bullion  to 
produce  the  variations  we  have  described,  must  be  considered  as  one  of 
the  laws  of  the  circulation." 

One  Bank  of  Issue. 

Mr.  Cotton,  who  was  the  Governor  of  the  Bank  of  England  when  the 
Act  of  1644  was  passed,  stated  in  the  evidence  before  a  Committee  of 
the  House  of  Commons,  in  1848,  that  the  ultimate  object  of  that  Act  was 
the  establishment  of  one  bank  of  issue.  (Commons,  4561.)  I  was  ex- 
amined on  this  subject  before  the  committee  on  banks  of  issue,  in  the  year 
1841.  The  following  is  a  summary  of  my  evidence  :  — 

1.  If  we  had  only  one  bank  of  issue  we  should  have  sometimes  too 
much  money  and  sometimes  too  little  for  the  wants  of  trade.  —  "  I  think  it 
is  one  of  the  inconveniences  of  a  metallic  currency,  and  would,  in  fact,  be 
one  of  the  inconveniences  of  a  sole  bank  of  issue,  that  at  one  part  of  the 
year  we  should  have  too  much  money,  and  at  another  part  too  little  ;  be- 
cause, as  money  would  not  fluctuate  in  amount,  and  the  demands  of  trade 
would  fluctuate,  the  amount  of  money  would  not  be  proportionate  through- 
out the  year  to  the  demands  of  trade." "I  have  shown  from 

Appendix  34,  that  even  taking  the  whole  circulation  together,  there  is  a 
difference  varying  from  two  to  four  millions,  in  the  total  amount  of  the 
circulation ;  and,  therefore,  after  supposing  all  these  transfers  to  have 
taken  place,  if  they  could  have  taken  place  at  all,  and  that  the  surplus 
of  one  district  was  to  supply  the  wants  of  another,  still  there  would  be  a 
very  great  inequality  in  the  amount  of  money,  as  compared  with  the  de- 
mands of  trade." 

"  It  appears  from  Appendix  34,  that  the  total  amount  of  notes  in  Eng- 
land, Scotland,  and  Ireland,  varies  very  considerably  in  different  months 
of  the  year.  Supposing,  then,  that  you  had  one  bank,  and  that  all  the 
notes  in  circulation  were  the  notes  of  that  one  bank,  which  did  nothing 

243 


A  Treatise  on  Banking, 

but  is»w>  notes  against  gold,  and  gold  against  notes,  how  would  you  em- 
ploy tho*e  mrtBt  which  were  not  wanted  in  the  slack  periods  of  the  sea- 
son? **..'..."  It  is  evident  from  Apix-mlix  31,  that  during  some  part 
of  the  year  there  is  not  employment  for  the  entire  amount  of  money  that 
it  required  in  unortw  Mason  of  the  year ;  and  if  you  had  one  bunk 
of  issuo.  as  you  could  not  contract  the  circulation,  you  would  have  a 
surplus  circulation,  which  would  have  the  effect  of  lowering  the  rate  of 
interest,  and  promoting  speculation.11 

2.  One  bank  of  issue  would  reduce  the  means  of  the  country  bankers 
to  a/ord  «>rirf<mrr  to  their  customers,  and  hence  cause  great  distress, 
ffjMrfcj//y  in  the  agricultural  districts.  —  "  What  would  be  the  effect 

which  you  think  it  would  produce  upon  country  bankers  ?  " "  I 

think  the  banks,  in  the  first  place,  having  to  pay  ofT  their  notes,  it  would 
reduce  their  funds,  from  which  they  now  give  accommodation  to  their 
customers ;  and  in  order  to  find  funds  to  pay  off  those  notes,  they  would 
have  to  recall  loans,  and  to  reduce  disconnts  to  such  a  degree  as  to  cause 
considerable  distress  throughout  the  country,  and  more  especially  in  the 
agricultural  districts.1' 

3.  The  bankers  would  be  compelled  to  increase  their  charges.  — 
••  What  effects  do  you  imagine  would  ensue  when  the  measure  had  once 

been  carried  into  effect  ?  " "  After  the  meaure  had  once  been 

carried  into  effect,  the  charges  which  the  country  bankers  would  be  com- 
pelled to  make  upon  that  accommodation  which  they  would  still  have  the 
power  of  affording,  must  be  considerably  increased.1' 

u  Why  ?  '* "  Because  they  would  then  get  no  profit  upon  the 

notes ;  at  present  they  can  afford  to  advance  men  y  at  a  low  rate  of  in- 
terest when  issued  in  their  own  notes,  because  of  the  profit  upon  those 
notes.  When  I  was  in  Ireland,  I  discounted  bills)  tthe  same  rate  which  was 
charged  by  the  Bank  of  England  here,  and  for  the  same  reason,  because 
I  issued  my  own  notes ;  but  if  the  country  bankers  had  to  bring  the  money 
from  a  distance  and  lend  it  to  their  customers,  they  must  get  a  greater  in- 
terest from  their  customers  than  they  could  get  by  employing  in  London 
or  elsewhere,  and  hence  they  must  make,  cither  in  the  form  of  interest, 
or  in  the  form  of  commission,  heavier  charges  than  they  made  before.1' 

4.  One  bank  of  issue  would  cause  some  of  the  smaller  banking  estab- 
lishments to  be  discontinued.  — "  The  profit  on  the  circulation  being  thus 
reduced,  there  would  be  a  further  effect  by  the  limitation  of  banking  es- 
tablishments ;  for  some  of  those  establishments  are  so  small,  and  estab- 
lished in  remote  places,  that  they  would  scarcely  pay  the  expense  of  con- 
ducting them,  unless  for  the  profits  of  the  circulation  ;  and  yet  the  with- 
drawal of  those  establishments,  though  connected  with  no  great  profit  to 
the  bank,  would  be  attended  with  very   considerable  loss  and   incon- 
venience to  the  inhabitants  of  those  places,  because  those  banks  act  as 
receivers  of  the  surplus  capital,  and  hence  they  are  useful  to  persons  who 
have  money  to  place  in  those  books  ;  they  act  as  discounters  and  grantors 
of  loans,  and  hence  they  are  useful  to  the  productive  industry  of  the 
country ;  they  are  also  useful  as  banks  of  remittance,  for  the  purpose  of 
asking  payments  from  those  places  elsewhere,  and  hence  th'ey  are  useful 
to  traders ;  and  those  useful  purposes,  as  far  as  many  small  banks  are 


The  Bank  of  England. 

concerned,  would  be  altogether  annihilated,  if  those  establishments  did 
not  issue  their  own  notes." 

"  In  your  opinion,  the  suppression  of  their  circulation  would  render  it 
necessaiy  for  them  to  charge  a  higher  commission  upon  their  operations, 
or  a  higher  interest  upon  the  loans  which  they  make  ?  " "  With  re- 
gard to  those  small  establishments,  I  do  not  think  any  rate  of  commission 
could  pay  the  expense :  with  regard  to  the  larger  establishments,  you 
might  make  up  for  the  deficiency  of  profit  upon  the  circulation  by  an  in- 
creased charge  of  commission  ;  but  with  regard  to  small  establishments,^ 
remote  places,  the  business  is  not  sufficient,  even  with  the  charge  of  com- 
mission, to  pay  the  expense  without  the  profits  of  the  circulation  :  annihi- 
lation of  the  circulation  would  lead  to  annihilation  of  the  bank." 

5.  One  bank  of  issue  would  lead  to  th'e  substitution  of  bills  of  exchange, 
or  some  other  form  of  credit  currency.  —  "  Do  you  conceive  that  it  would 
have  any  effect  upon  what  you  have  called  the  amount  of  the  circulation, 

which  in  your  opinion  is  required  at  different  times  of  the  year  ?  " 

"  I  think  it  would  have  a  considerable  effect  generally  in  the  reduction  of 
the  circulation  ;  because  if  the  circulation  were  issued  by  one  single  bank, 
the  local  bankers  in  the  respective  districts  would  have  no  interest  in  in- 
creasing the  amount  of  that  circulation,  and  hence,  in  places  where  it 
could  be  done,  the  bankers  would  most  likely  have  recourse  to  a  bill  cir- 
culation, and  they  would  substitute  bills  for  the  circulation  of  this  one 
bank  of  issue.     We  know  that  at  Manchester  and  Liverpool,  and  in  other 
places  in  that  district,  a  bill  circulation,  a  short  time  ago,  was  almost  the 
entire  circulation;  and  it  was  not  till  the  Bank  of  England  established 
branches  in  those  places,  that  the  bill  circulation  became  considerably  re- 
duced ;  and  even  then  the  hank  obtained  a  circulation  in  those  places  only 
by  offering  their  notes  to  country  bankers  at  a  reduced  rate  of  interest. 
Now,  if  you  had  only  one  bank  of  issue,  it  is  not  to  be  supposed  that  the 
country  bankers  would  obtain  those  notes  at  a  reduced  rate  of  interest, 
and  consequently  they  would  have  no  advantage  in  getting  them  into  cir- 
culation ;  they  would  fall  back  upon  their  bill  circulation,  upon  which  they 
got  a  profit,  and  the  amount  of  note  circulation  would,  I  think,  be  consid- 
erably reduced." 

6.  With  one  bank  of  issue,  the  reactions  of  the  Foreign  Exchanges 
would  produce  great  and  universal  distress,  and  yet  not  accomplish  that 
constant  conformity  between  the  London  and  country  circulation  which  is 
sought  to  be  attained.  — "  Do  you  conceive  that  such  a  change  as  has 
been  contemplated,  namely,  the  abolition  of  country  bank-notes,  would 

produce  any  effect  upon  the  foreign  exchanges  ?  " "  The  effect 

upon  the  foreign  exchanges  would  depend  upon  the  principle  upon  which 
the  single  bank  of  issue  was  conducted.     If  conducted  merely  by  issuing 
gold  for  notes  and  notes  for  gold,  I  consider  that  when  the  foreign  ex- 
changes were  favorable,  and  brought  in  a  large  amount  of  gold,  then  there 
would  be  a  large  amount  of  notes  put  into  circulation.     I  think  that  was 
the  case  in  1837  and  1838,  although  the  Bank  of  England  did  not  issue 
to  such  an  extent,  as,  upon  the  principle  assumed,  this  one  bank  of  issue 
would  be  compelled  to  do.    I  consider  that  thus  this  large  amount  of  notes 
put  into  circulation  against  the  importation  of  gold  would  reduce  the  rate 

u*  245 


A  Treatise  on  Banking. 

of  intawsl,  would  excite  speculation,  ond  lead  to  foreign  investment-* ;  that 
«  reaction  would  then  take  place,  and  the  amount  <>f  rontrm-tion  would  bo 
very  considerable,  so  as  to  produce  very  great  distress." 

"Now,  whether  you  have  different  bank",  <T  whether  you  have  only 
one  bank,  if  there  is  a  certain  amount  of  circulation  in  the  country,  ami  u 
certain  amount  in  London,  and  the  Bank  of  England,  or  the  central  I  ..-ink. 
purchase  a  large  amount  of  bullion  in  London,  that  immediately  disturbs 
the  proportion  that  existed  between  the  London  circulation  and  the  country 
circulation;  and,  on  the  other  hand,  if  there  is  a  demand  l'»r  bullion  to  go 
abroad,  and  bullion  is  sold  at  the  central  office,  that  will  contract  the  circu- 
lation, and  contract  it  much  more  than  it  could  be  immediately  conir.u-tcd 
in  the  country.  If,  therefore,  the  liability  to  a  disproportion  in  amount  be- 
i ween  the  country  and  the  London  circulation  is  a  defect  in  the  existing 
system,  it  is  a  defect  which  the  establishment  of  only  one  bank  of  issue 
will  not  remedy." 

7.  Tke  establishment  of  one  bank  of  issue  would  embarrass  the  Fiscal 
ofttmtioni  of  the  Government.  — "  I  may  now  state,  with  reference  to  the 
payment  of  the  public  dividends,  that  the   Hank  of  England  advances 
loam  in  December,  before  the  dividends  arc  paid,  which  loans  are  dis- 
charged after  the  dividends  are  paid,  and  thus  the  fluctuation  in  the  cur- 
rency is  very  considerably  diminished  from  what  it  otherwise  would  be. 
Now,  if  we  had  a  bank  that  could  not  do  this,  if  the  currency  were  issued 
upon  what  have  been  called  currency  principles,  then  the  Chancellor  of 
the  Exchequer  must  have  the  whole  amount  of  the  January  dividends  in 
bis  strong  room  before  he  could  pay  those  dividends.     ( >ut  of  the  circula- 
tion of  England  and  Wales,  consisting  of  about  .£28,000,000,  you  miftt 
collect  eight  millions  and  a  half,  and  lock  them  up  in  the  custody  of  the 
(government  previously.to  the  payment  of  the  dividends ;  then  you  pay 
out  in  a  mass  these  eight  millions  and  a  half,  and  that  in  a  state  of  con- 
tracted currency;  and  thus  you  go  on,  four  times  in  the  year,  producing 
the  most  violent  and  most  extravagant  fluctuations :  whereas  now,  by 
the  excellent  plan  adopted  by  the  Bank  of  England,  in  issuing  her  notes 
before  the  payment  of  the  dividends,  by  means  of  loans,  which  are  dis- 
charged after  the  payment  of  the  dividends,  notwithstanding  you  pay  ei^ht 
millions  and  a  half  of  dividends,  you  produce  a  fluctuation  in  the  currency 
of  only  two  millions  and  a  half." 

8.  The  principle  of  one  bank  of  issue  cannot  be  applied  to  the  various 
currencies  of  the  United  Kingdom. — "  What  is  the  general  conclusion 

which  you  propose  to  draw  from  the  tables  yon  have  put  in  ?  " 

•*  The  general  conclusion  I  would  draw  is,  that  the  Ilank  of  England  is 
governed  by  certain  laws  which  do  not  apply  to  the  country  circulation  ; 
that  the  country  circulation  of  England  is  also  governed  by  laws  pern- 
liar  to  itself;  that  the  circulation  of  Ireland  is  also  governed  by  laws  pr- 
coliar  to  itself;  that  the  circulation  of  Scotland  is  also  governed  by  laws 
peculiar  to  itself;  that  those  re-pfrtivo  circulations  are  all  governed  by 
uniform  taws, as  is  shown  by  their  arriving  at  nearly  the  same  point  at  the 
sane  period  of  the  year;  and  therefore  that  you  cannot  introduce  any 
system  by  which  all  those  various  circulations,  governed  by  different 

can  be  amalgamated  into  one  system;  that  such  a  sy-t<  m  would  he  at 

M6 


The  Bank  of  England. 

variance  with  itself,  and  would  tend  to  destroy  that  beautiful  system  of 
country  banking  which  now  exists  in  this  country,  —  a  system  which 
has  tended  very  much  to  the  prosperity  of  this  country,  which,  by  receiv- 
ing the  surplus  capital  of  different  districts,  and  giving  out  the  capital  for 
the  encouragement  of  trade,  calls  forth  all  the  natural  resources  of  the 
countiy,  and  puts  into  motion  the  industry  of  the  nation,  and  at  the  same 
time  supplies  a  circulation  which  expands  and  contracts  in  each  district 
according  as  it  is  required  by  the  trade  or  agriculture  of  the  district. 
Those  expansions  or  contractions  take  place  at  different  periods  of  the 
year  in  different  districts ;  the  circulation  expands  when  the  wants  of 
trade  require  it,  and  when  no  longer  wanted  it  again  returns ;  and  I  think 
this  beautiful  system,  in  the  language  of  the  resolutions  passed  by  the 
deputies  from  the  joint-stock  banks,  '  has  greatly  promoted  the  agricul- 
ture, trade,  mining,  and  general  industry  of  the  nation,  and  that  equal  ad- 
vantages cannot  be  produced  by  one  bank  of  issue.'  " 

We  shall  conclude  this  section  by  copying  the  correspondence  between 
the  First  Lord  of  the  Treasury  and  the  Chancellor  of  the  Exchequer  and 
the  Bank  of  England,  respecting  the  suspension  of  the  Act  of  1844. 

"  GENTLEMEN,  "  Downing  Street,  25th  October,  1847. 

"  Her  Majesty's  Government  have  seen  with  the  deepest  regret  the  pressure 
which  has  existed  for  some  weeks  upon  the  commercial  interests  of  the  country,  and 
that  this  pressure  has  been  aggravated  by  a  want  of  that  confidence  which  is  necessary 
for  carrying  on  the  ordinary  dealings  of  trade. 

"  They  have  been  in  hopes  that  the  check  given  to  transactions  of  a  speculative  char- 
acter, the  transfer  of  capital  from  other  countries,  the  influx  of  bullion,  and  the  feeling 
which  a  knowledge  of  these  circumstances  might  have  been  expected  to  produce, 
would  have  removed  the  prevailing  distrust. 

"  They  were  encouraged  in  this  expectation  by  the  speedy  cessation  of  a  similar 
state  of  feeling  in  the  month  of  April  last. 

"These  hopes  have,  however,  been  disappointed,  and  her  Majesty's  Government 
have  come  to  the  conclusion,  that  the  time  has  arrived  when  they  ought  to  attempt,  by 
some  extraordinary  and  temporary  measure,  to  restore  confidence  to  the  mercantile 
and  manufacturing  community. 

"  For  this  purpose,  they  recommend  to  the  directors  of  the  Bank  of  England,  in  the 
present  emergency,  to  enlarge  the  amount  of  their  discounts  and  advances  upon  ap- 
proved security ;  but  that,  in  order  to  retain  this  operation  within  reasonable  limits,  a 
high  rate  of  interest  should  be  charged. 

"  In  present  circumstances,  they  would  suggest  that  the  rate  of  interest  should  not 
be  less  than  8  per  cent. 

"  If  this  course  should  lead  to  any  infringement  of  the  existing  law,  Her  Majesty's 
Government  will  be  prepared  to  propose  to  Parliament  on  its  meeting,  a  Bill  of  In- 
demnity. They  will  rely  upon  the  discretion  of  the  directors  to  reduce  as  soon  as  pos- 
sible the  amount  of  their  notes,  if  any  extraordinary  issue  should  take  place,  within 
the  limits  prescribed  by  law. 

"Her  Majesty's  Government  are  of  opinion  that  any  extra  profit  derived  from  this 
measure  should  be  carried  to  the  account  of  the  public,  but  the  precise  mode  of  doing 
so  must  be  left  to  future  arrangement. 

"  Her  Majesty's  Government  arc  not  insensible  of  the  evil  of  any  departure  from  the 
law  which  has  placed  the  currency  of  this  country  upon  a  sound  basis  ;  but  they  feel 
confident  that,  in  the  present  circumstances,  the  measure  which  they  have  proposed 
may  be  safely  adopted,  and  at  the  same  time  the  main  provisions  of  that  law,  and  the 
vital  principle  of  preserving  the  convertibility  of  the  bank-note,  may  be  firmly  main- 
tained. • 

"We  have  the  honor  to  be,  Gentlemen, 

"  Your  obedient  humble  Servants, 
"  The  Gmiemnr  and  Deputy  Governor  (Signed,)  "J.  RUSSELL. 

of  tlie  Bank  of  England."  "  CHARLES  WOOD. 

247 


A  TYvof  to  on  Banking. 

•  Bank  ofKnyland,  S5M  October,  1847. 

W«  haw  UM  IKMOT  to  acknowledge  your  letter  of  thia  day's  date,  which 
w+havt  Mkbouuod  to  UM  Oowt  of  Directors,  and  w«  inclose  a  copy  of  iu  resolutions 

"We  hare  th«  honor  to  be,  Gentlemen, 

^  .iur  most  obedient  Servant*, 

"  JAMKS  MORRIS,  Governor. 
"  II.  J.  PRMCOTT,  Deputy  Governor. 
-  TV  ta*  fir*  I*rd  of  tnt  TYvMTV  and  At 


•  At  a  Coort  of  Director*,  at  the  Bank  of  England,  Monday,  35th  October,  1847 : 
JhsaM,— 

•  I.  That  thu  Coort  do  accede  to  the  recommendation  contnined  in  the  letter  from 
the  Kim  Lord  of  the  Treasury  and  the  Chancellor  of  the  Exchequer,  dutcd  this  day, 
and  addressed  to  the  Governor  and  Deputy  Governor  of  the  Bank  of  England,  which 
kMJwtbeeo  read. 

•  S.  That  the  minimum  rate  of  discount  on  bills  not  having  more  than  95  days  to 
m  be  8  per  cent. 

•S.  That  the  advances  he  made  on  bills  of  exchange,  on  stock,  exchequer  bills,  and 
other  approved  securities,  in  Hums  of  not  less  than  two  thousand  pound*,  and  for  a  pe- 
riod to  be  Axed  by  the  Governors,  at  the  rate  of  8  per  cent  per  annum." 


"  GnrruXRV,  "  Downing  Street,  23<f  November,  1 847. 

"  Her  Majesty's  Government  have  watched,  with  the  deepest  interest,  the 
gradual  revival  of  confidence  in  the  commercial  classes  of  the  countrv. 

•  They  have  the  satisfaction  of  believing  that  the  course  adopted'  by  the  Bank  of 
BaffauM,on  their  recommendation,  has  contributed  to  produce  this  result,  whilst  it  has 
led  to  no  infringement  of  the  law. 

u  It  appears,  from  the  acconnts  which  yon  have  transmitted  to  us,  that  the  reserve 
of  the  Bank  of  England  has  been  for  some  time  steadily  increasing,  and  now  amounts 
to  £  5,000,000.  This  increase  has,  in  a  great  measure,  arisen  from  the  return  of  notes 
and  coin  from  the  country. 

"  The  bullion  exceeds  £  10,000.000,  and  the  state  of  the  exchanges  promises  a  fur- 
ther influx  of  the  precious  raetaU. 

'The  knowledge  of  these  facts  by  the  public  is  calculated  to  inspire  still  further  con- 


"  In  these  circumstances,  it  appears  to  her  Majesty's  Government  that  the  purpose 
which  thev  had  in  view  in  the  letter  which  we  addressed  to  you  on  the  25th  October 
has  been  folly  answered,  and  that  it  is  unnecessary  to  continue  that  letter  any  longer 
(•force. 

"  We  have  the  honor  to  be,  Gentlemen, 

"  Your  obedient  humble  Servants, 

(Signed,)  "J.  ROSRKLT*. 

•  Tit  Governor  md  Dep*tw  Governor  "  CHAKLKS  WOOD. 

•/ tl*  Bank  of  Enola»d.n 


•  GRVTLCMKY,  u  Bank  of  England,  23d  Novemlter,  1 847 . 

*  We  have  the  honor  to  acknowledge  the  receipt  of  your  letter  of  this  day's 
daf.  in  which  TOO  communicate  to  us  that  in  consequence  of  the  gradual  revival  of 
OMkidoare  in  the  commercial  classes  of  the  country,  it  appears  to  her  Majesty's  Gov- 
WUMJM  that  the  object  they  had  in  view  in  the  letter  they  addressed  to  us  on  the  25th 
October  has  been  rally  answered,  and  that  it  is  unnecessary  to  continue  that  letter  any 
Ing*  to  fore*. 

*  We  have  the  honor  to  be,  Gentlemen, 

u  Your  most  obedient  Servants, 

"JAMES  MOKRIR,  Governor 

u  II .  J.  PRKSCOTT,  Deputy  Governor. 

248 


Of  Banking  Institutions. 


SECTION  II.  — THE  LONDON  PRIVATE  BANKERS. 

BY  the  last  Bank  Charter  Act  (7  &  8  Viet.  c.  32,  s.  21),  passed  in  the 
session  of  1844,  it  was  enacted  "  that  every  banker  in  England  and  Wales, 
who  is  now  carrying  on,  or  shall  hereafter  carry  on,  business  as  such, 
shall,  on  the  first  day  of  January  in  each  year,  or  within  fifteen  days 
thereafter,  make  a  return  to  the  Commissioners  of  Stamps  and  Taxes  at 
their  head  office  in  London,  of  his  name,  residence,  and  occupation,  or  in 
the  case  of  a  company  or  partnership,  of  the  name,  residence,  and  occu- 
pation of  every  person  composing  or  being  a  member  of  such  company  or 
partnership,  and  also  the  name  of  the  firm  under  which  such  banking 
company  or  partnership  carry  on  the  business  of  banking,  and  of  every 
place  where  such  business  is  carried  on  ;  and  if  any  such  banker,  com- 
pany, or  partnership,  shall  omit  or  refuse  to  make  such  return  within  fif- 
teen days  after  the  said  first  day  of  January,  or  shall  wilfully  make  other 
than  a  true  return  of  the  persons  as  herein  required,  every  banker,  com- 
pany, or  partnership  so  offending,  shall  forfeit  and  pay  the  sum  of  £  50  ; 
and  the  said  Commissioners  of  Stamps  and  Taxes  shall,  on  or  before  the 
first  day  of  March  in  every  year,  publish  in  some  newspaper  circulating 
within  each  town  or  county  respectively,  a  copy  of  the  return  so  made  by 
every  banker,  company,  or  partnership  carrying  on  the  business  of  bank- 
ers within  such  town,  or  respectively,  as  the  case  may  be." 

This  was  the  first  time  that  any  of  the  banking  companies  in  London 
were  required  to  make  returns  to  Government  of  the  number  or  names  of 
their  partners.  All  banks  that  issued  notes  were  required  when  they  ap- 
plied for  a  license,  to  name  tneir  partners ;  but  as  none  of  the  London 
bankers  issued  notes,  they  required  no  license,  and  made  no  return.  Nor 
did  the  joint-stock  banks  established  in  London,  make  any  returns  to  the 
Government  of  their  partners.  For  as  they  did  not  possess,  until  the 
year  1844,  the  power  of  suing  and  being  sued  in  the  name  of  their  public 
officers,  they  did  not  register,  at  any  Government  office,  the  names  of 
their  partners,  though,  in  some  cases,  these  names  were  appended  to  the 
Annual  Reports  of  the  directors.  This  Act  (7  &  8  Viet.  c.  32)  came 
into  operation  in  January,  1845,  and  we  have  now,  therefore,  for  the  first 
time,  the  means  of  obtaining  the  names  of  all  the  partners  in  all  the  bank- 
ing establishments  throughout  England  and  Wales.  (These  are  inserted 
every  year  in  the  Banking  Almanac.) 

The  Act  not  only  requires  that  the  bankers  shall  make  these  returns 
between  the  first  and  fifteenth  of  January  in  each  year,  it  requires  also, 
that  the  Commissioners  of  Stamps  and  Taxes  shall  publish  them  before 
the  first  of  March  following,  in  some  newspaper  that  circulates  within  the 
town  or  county  in  which  the  bankers  making  the  return  carry  on  their 
business.  The  returns  from  the  London  banks  are  published  in  supple- 
ments to  the  London  Gazette,  which  we  presume  is  considered  to  be  a 
newspaper  within  the  meaning  of  the  Act. 

The  particulars  required  to  be  returned  by  the  Act,  and  stated  in  the 
Gazette,  are,  the  name  of  the  firm  or  company ;  the  name,  residence, 
and  occupation  of  the  persons  of  whom  the  company  or  partnership  con- 

249 


A  TVeofbe  on  Banking. 
;  and  the  name  of  the  place  or  places  whero  the  business  is  carried 


oo. 


The  Loodon  banking  establishments,  according  to  the  last  ivtnrn,  con- 
sist of  fifty-eight  partnerships,  each  not  having  MI-MV  than  six  partners; 
and  of  five  public  companies  which  are  usually  styled  joint-stock  banks. 
The  former  may  be  divided  into  three  classes  :  — 

I.  Those  who  are  members  of  the  Clearing-house. 

II.  Those  located  west  of  Temple-bur,  but  are  not  members  of  the 

Clearing-house. 

III.  Those  located  east  of  Temple-bar. 


1.  A  Lut  oft)**  London  Banking  Firm*  wlto  attend  At 


No.  of 
Parlncri. 


1.  Barclay,  Beran,  Tritton,  4  Co.     .        .       .fire 

1.  Barnard,  I>in»dalr,  &  Co.         .        .        .  two 

3.  Baraett,  Hoare,  4  Co  ......  five 

4.  Botaaqoet,  Frank*,  it  Whatman       .        .  three 
ft.  Brown,  Jaasoo,  4  Co.    .        .        .        .  six. 

6.  Cornel  4  Co.    ......  four 

1.  Drniaoq,  Heywood,  Kcnnanl,  &  Co.      .        .  four 

8.  Fuller*  ft  Co  .......  three 

•i.  Halifax,  Mills,  ft  Co.    .        .        .        .six 

10.  Hanbury*,  Taylor,  4  Lloyd       ...  fire 

11.  Hanker*  Co  .......  four 

II  Jones,  Lloyd,  4  Co.  .....  fire 

IS.  Lnbbock,  Forster,  &  Co  .....  three 

14.  Martin*,  Stones,  &  Martins        .        .        .  four 

15.  Macterman,  Peters,  Mildred,  Masterman,  & 

Co.    ....... 

U.  Prescott,  Grote,  Cave,  ft  Co.     .        . 

17.  Price,  Marryatt,  &  Co  ......  two 

18.  Koharu,  Curtis,  &  Co  .....  four 

It.  Bsgtn,  Oldiag,  ft  Co  ......  four 

•0.  Sapte,  Ifsspntt,  Banbury,  ft  Ca  .  three 

ft.  Smith,  Payne,  ft  Smith  .....  six 

&  Spooner,  Atwoods,  ft  Co.         ...  two 

9*.  ijwsasoa,  Salt,  4  Sons         ....  three 

K.  Williams,  Deacon,  Labouchere,  &  Co.        .  five 

».  Wilitt,  Peraral,  4  Co  ......  six 

Total,  104  partners. 


four 


Rentlencet. 
54,  Ix)inl>:vnl-street. 
50,  Cornliill. 
62,  Lombord-gtreet 
73,  Lombard-street. 
32,  AU-hurch-luiu  . 
29,  Cornliill. 
4,  Lombard-street. 
65,  Moorgatc-street. 

67,  Lombard-street. 
60,  Lombard-street. 
7,  Feiu-lnirrh-M! 
43,  Lothbury. 

11,  Maii^ion-IIouse-street. 

68,  Lombard-stivi-t. 

(  34  &  .'IS,  Nicholas-lane,  Lorn- 
(      bunl-st! 

62,  Threadneedle-street. 

3,  King  William-street. 

15,  Lombard-street. 

29,  Clcment's-lane. 

77,  Lorn  bard -street 

1,  Lombard-street 

1'7,  (iraccchnn-h-street 

2O,  Ijombard-str 
ivhiu-lane. 

76,  Lombard-street 


S.  A  Lut  if  Ante  BtaJdng  r»rmt  Wat  of  TtmpU  Bar,  *ko  an  not  Member*  of  the  Clearing 


Jhw  if  U*  Fiim. 
1.  Boarerie,  Norman,  4  Mnrdock 

ill.  Marten,  4  Co.  . 
».  Cork*,  BUddlpa,  4  Co. 

4.  Cooiu  4  Co.     .        .        .        . 

5.  Mr-rt    DnUBOMMd         . 

«    Mallrtt,  Bobimoa,  4  Co.  .      ,, 

7.  Hcrrie*.  Farqnhar,  4  Co.      . 

8.  CtMtte  UopkiMon  4  Co. 

•.  KMMOOI  4  Co.  .        • 

10.  Sir  Saaad  Soots  f  Co. 


960 


No  of 
Partner*. 

three  1 1 ,  Haymarket 

three  25,  Old  Boml-.-trcet 

five  43,  Charinjf-CroM. 

four  58  &  59  Strand, 

five  49,  Charing  Cross, 

four  14,  Great  George-street 

four  16,  St.  Jamcs's-street 

two  .*}.  K«-i;<.|it.8treet. 

four  I.  1'all  M... 

three  1 ,  Cavenduh-sqnam 


London  Private  Bankers. 

No.  of 
Name  of  the  Firm.  Partners.  Residences. 

11.  Strahan,  Pauls,  &  Bates         .        &     »  ..     .    four  217,  Strand. 

12.  Richard  Twining  &  Co six  215,  Strand. 

Total,  47  partners. 

3.  A  List  of  the  Banking  Firms  East  of  Temple  Bar. 

No.  of 
Name  of  the  Firm.  Partners.  Residences. 

1 .  Abraham  Baner  &  Co one  71,  King  William-street 

2.  William  and  John  Biggerstaff  .        .        .         two  8,  West  Smithfield. 

3.  James  Bull,  Son,  &  Co two  85  &  86,  Cheapside. 

4.  Child  &  Co four  1,  Fleet-street. 

5.  Roger  Cunliffe one  24,  Bucklersbury. 

6.  Cunliffes,  Brooks,  &  Co.   ....         two  24,  Lombard-street. 

7.  Robert  Davies  &  Co two  187,  High-st,  Shoreditch. 

8.  Dixon,  Brooks,  &  Dixon  .        .        .        .         three  25.  Chancery-lane. 
•9.  Drewett  &  Fowler         .        .        .        .        .    two  4,  Princes-street. 

10.  John  Feltham  &  Co.          ....  two  42,  Lombard-street. 

11.  Goslings  &  Sharpe five  19,  Fleet-street. 

12.  C.  Hill  &  Sons two  17,  West  Smithfield. 

13.  Messrs.  Hoare five  37,  Fleet-street 

14.  Hugh  &  John  Johnston  &  Co.   .        .        .  three  15,  Bush-lane. 

15.  SirC.  S.Kirkpatrick,Dalrymple,MacGre-)  f  29  Gracechurch-street 

gor,  Twigg,  &  Co )  ' 

16.  Poeklin£ton  &  Lacy          ....  two  60,  West  Smithfield. 

17.  Praed,  Fane,  &  Co four  189,  Fleet-street. 

18.  Puget,  Bainbridge,  &  Co.  .        .        .         .  four  12,  St.  Paul's  Churchyard. 

19.  John  Shank one  76,  West  Smithfield. 

20.  John  &  W.  S.  Stride         ....  two  41,  West  Smithfield. 

21.  Thomas  G.  Tisdale one  15,  West  Smithfield. 

Total,  54  partners. 

The  Clearing  Banks  are  banks  of  deposit  and  of  discount,  and  they  act 
as  agents  to  the  country  banks.  The  banks  in  Fleet-street  and  in  West- 
minster do  not  usually  discount  bills  for  their  customers,  nor  act  as  agents 
to  country  banks.  Their  connections  embrace  chiefly  the  clergy,  the 
gentry,  and  the  nobility.  Their  loans  to  their  customers  are  chiefly  upon 
landed  security,  and  they  are  supposed  to  hold  a  large  amount  of  exche- 
quer bills  and  other  Government  securities.  None  of  the  London  bankers 
allow  interest  on  deposits,  or  charge  commission  on  town  accounts.  Those 
who  act  as  agents  to  country  banks  charge  a  commission  on  the  debit  side 
of  the  account,  and  some  of  them  allow  interest  on  the  daily  balance.  In- 
stead of  a  pro  rala  commission,  some  country  banks  pay  their  agent  by  a 
fixed  annual  payment,  or  by  keeping  in  his  hands  a  certain  balance  with- 
out interest.  None  of  the  present  London  bankers  have  ever  issued  notes, 
though,  until  the  year  1844,  they  had  legally  the  power  of  doing  so. 
Several  of  them  issue  "  Circular  Notes,"  for  the  use  of  travellers  on  the 
continent. 

The  following  is  a  summary  of  part  of  the  evidence  delivered  before 
the  Bank  Committee  of  1832,  by  George  Carr  Glyn,  Esq.,  respecting  the 
London  bankers  :  — 

"  There  are  sixty-two  private  banks  in  the  metropolis,  none  of  which  for  the  last  fifty 
years  have  issued  notes  of  their  own,  though  it  would  seem  that  such  of  them  as  con- 
sist of  fewer  than  six  partners  might  lawfully  circulate  their  own  paper  if  they  pleased. 
As  they  act  entirely  with  the  Bank  of  England  paper,  it  is  doubtful  whether  there  be 

251 


A  Treatite  on  Banking. 

•ay  limit  to  UM  number  of  partners  of  which  London  private  hank*  may  consul 
They  receive  deposits,  upon  which  they  nay  no  interest.  The  system  of  allowing  in- 
Meet  on  deposits  WM  ferasriy  tried  in  London  ;  but  the  houses  that  attempted  it  in- 
variably  failed.  The  depoeto  held  by  the  London  bankers  are  generally  composed  of 
very  large  MOU,  which  ait  aseaatarily  payable  on  demand  ;  and  hence  they  cannot  be 
maoe  a*o  of  to  the  same  extent  a*  tbo*e  which  are  intrusted  to  country  bankers,  and 
which,  wheaever  iatarast  i*  allowed,  are  usually  left  with  them  for  a  stipulated  \» 
Oo  UM  other  band,  in  all  ordinary  transactions,  the  London  banks  charge  no  coinmis- 
. 

"Ik*  London  bank*,  in  order  to  be  able  to  meet  their  engagements,  usually  keep  a 
lam  dcpoait,  Marly  equal,  perhaps,  to  half  of  what  they  hold  in  reserve,  in  the  Bank 
uf  England;  a  portion  of  their  cum  in  fuml-  they  necessarily  hold  ut  home,  in  bank 
paper,  and  a  small  amount  in  gold.  Their  deposit  in  the  lunik  they  consider  as  so 
many  notes  in  their  drawer,  liable  to  be  called  out  by  the  daily  fluctuations  in  the  ac- 
rovats  of  tbeir  customer*.  The  balances  in  their  hands,  often  very  large,  are  frequently 
withdrawn  without  notice;  hence  their  intercourse  is  almost  hourly  with  the  Bank  of 
Kajctand.  from  which  they  receive  every  facility. 

~  In  order  to  turn  their  funds  to  pront,  the  London  bankers  employ  as  much  money 
as  they  can  among*!  their  customers.  They  invest  a  considerably  larger  proportion 
of  ihstr  deposits  in  bills  of  exchange  and  promissory  notes,  than  in  public  >r<-uriti'  -. 
The  citT  banker  U,  however,  under  a  disadvantage  in  this  respect,  which  is  not  felt  by 
the  banker  at  the  west  end  of  the  town.  The  latter  may,  to  a  certain  extent,  depend 
apoa  the  OM  of  the  money  deposited  with  him,  as  his  accounts  are  usually  those  of 
comatnr  rautanen,  and  individuals  out  of  trade ;  whereas  the  former,  whose  accounts 
are  principally  those  of  persons  actively  engaged  in  commercial  or  money  operations, 
rsui  hard! v  know  three  davs  beforehand  what  the  amount  of  his  deposits  may  nc  at  any 
given  period.  The  London  bankers  are  obliged  to  employ  their  money  occasionally 
at  a  very  low  rate  of  interest.  In  some  cases,  it  may  have  been  within  the  last  twelve 
months,  Si  per  cent. ;  but  the  average  has  been  from  3  to  34,  and  it  has  fairly  kept  at 
that  rate.  The  highest  rate  has  been  4  for  short  bills,  but  5  has  been  charged  for  bills 
of  twelve  or  eighteen  months." 

We  shall  now  describe  the  mode  of  conducting  the  clearing,  or  the  way 
in  which  many  of  the  London  bankers  make  their  exchanges  with  each 
other.  Thaw  exchanges  arc  made  at  the  Clearing-house.  At  this  house, 
which  is  situated  in  Lombard-street,  in  a  part  of  the  old  Post-office,  a 
clerk  attends  from  each  banking-house  twice  a  day.  First,  he  goes  at 
eleven  o'clock  with  those  bills  which  he  has  upon  other  bankers.  Each 
bill  is  receipted  by  the  house  through  whom  it  is  presented,  and  the 
cheques  have  the  name  of  the  house  written  across  them.  He  drops  the 
bills  payable  at  each  house  in  a  separate  drawer  provided  for  the  purpose, 
and  he  enters  in  his  book,  under  separate  accounts,  those  bills  that  may 
be  dropped  into  his  drawer.  At  about  twelve  he  returns  home.  He  goes 
again  at  three  o'clock  with  a  fresh  quantity  of  bills  and  cheques,  which  he 
delivers  in  the  several  drawers  as  before.  He  then  enters  in  his  book 
those  cheques  that  may  have  been  delivered  in  his  drawer.  From  three 
to  four  he  receives  further  supplies  of  cheques  brought  to  him  from  home 
by  other  clerks.  These  cheques  he  enters  in  his  book,  and  they  are  then 
delivered  in  the  proper  drawers.  As  soon  as  the  clock  strikes  four,  no 
further  cheques  are  taken.  He  then  casts  up  each  account,  and  strikes 
the  balance.  These  balances  are  then  transferred  to  the  balance-sheet. 
The  balance-sheet  is  a  half  sheet  of  paper,  with  a  list  of  clearing  bankers 
printed  alphabetically  in  a  row  down  the  middle.  On  the  left-hand  side 
is  a  space  for  the  debtors.  On  the  right-hand  side  is  a  space  for  the  cred- 
itors. The  clerk  begins  with  the  house  at  the  top  of  the  list.  If  this 
house  owe*  him  money,  he  places  the  balance  on  the  left  side  of  the 

MS 


The  Clearing- House. 

name.  If  he  owes  money  to  this  house,  he  places  the  amount  on  the 
right  side.  Thus  he  proceeds  through  the  whole  list.  He  then  goes  to 
the  clerk  of  each  house,  and  calls  the  balance  to  him  ;  and  if  they  both 
agree,  they  mark  it  with  a  pen.  If  they  differ,  they  examine  where  the 
error  lies,  and  make  the  accounts  agree.  He  then  casts  up  each  side  of 
the  balance-sheet,  and  strikes  the  balance.  If  the  total  amount  of  debits 
exceeds  the  total  amount  of  credits,  he  will  have  to  receive  the  amount  of 
the  difference.  If  the  credits  exceed  the  debits,  be  will  have  to  pay  the 
difference. 

If  a  banker  does  not  choose  to  pay  a  bill  or  draft  brought  home  from 
the  Clearing-house,  it  is  sent  back,  and  dropped  in  the  drawer  of  the  house 
by  whose  clerk  it  was  presented.  On  the  bill  or  draft  is  stated  the  reason 
for  its  non-payment:  this  is  usually,  " no  effects,"  or  ano  advice";  some- 
times, "  not  sufficient  effects,"  or  "  refer  to  the  accepter."  If  this  draft 
was  delivered,  in  the  first  instance,  in  the  morning  clearing  (that  at  twelve 
o'clock),  it  is  usually  returned  before  four  o'clock  ;  but  in  all  cases,  it 
must  be  returned  before  five  o'clock,  or  else  it  will  not  be  taken  back,  and 
the  banker  is  considered  to  have  paid  it.  If  returned  after  four  o'clock, 
it  is  debited  and  credited  on  the  back  of  the  balance-sheet. 

All  this  is  usually  done  by  five  o'clock,  when  the  clerks  go  home  for  a 
Bhort  time  for  two  purposes :  one  purpose  is,  to  fetch  the  money  they 
nave  to  pay;  and  the  other  is,  to  see  if  their  balance  on  the  sheet  agrees 
•with  the  balance  of  the  books  at  home.  At  about  a  quarter  or  half-past  five 
they  return,  and  any  clerk  who  has  money  to  pay,  pays  it  to  any  clerk 
who  has  money  to  receive.  It  is  common,  however,  for  three  or  four 
clerks  to  form  a  sort  of  club,  and  pay  principally  among  themselves. 
Hence,  when  one  member  of  the  club  has  money  to  pay,  he  will  pay  it 
to  some  member  of  the  same  club  who  has  money  to  receive,  in  prefer- 
ence to  paying  it  to  any  one  else;  by  this  means  his  friend  obtains  his 
money  earlier  than  he  otherwise  might,  and  gets  off  sooner.  It  is  obvious 
that  all  the  money  that  is  to  be  paid  must  be  equal  to  all  the  money  that 
is  to  be  received.  If  this  should  not  appear  to  be  the  case,  there  must  be 
some  error ;  and  the  Clearing-house  is  then  said  to  be  wrong.  Two  in- 
spectors are  appointed  with  salaries,  to  detect  errors  of  this  kind  by  ex- 
amining and  marking  off  the  sheets.  Their  signature  is  also  necessary  be- 
fore any  money  can  be  paid  from  one  clerk  to  another. 

All  the  articles  in  the  clearing  are  entered  at  home  in  a  book  called  the 
Clearing-Book.  On  the  left-hand  are  entered  the  bills  and  drafts  upon 
other  bankers.  These  are  called  the  "  clearing-out."  On  the  right-hand 
are  entered  the  drafts  which  are  drawn  upon  the  house,  and  which  have 
.come  in  from  the  clearing.  These  are  called  the  "  clearing-in."  If  the 
"clearing-out"  is  a  greater  sum  than  the  "cloaring-in,"  the  clerks  say, 
"  the  clearing  brings  in"  ;  that  is,  the  clearing  clerk  will  bring  in  money 
from  the  Clearing-house.  In  the  other  case,  they  say,  "  the  clearing 
takes  out";  that  is,  he  will  takeout  money  from  the  Banking-house  to 
pay  away  .at  the  Clearing-house.  The  balance  of  this  book  should  agree 
with  the  clearer's  balance -sheet,  excepting  the  differences  of  the  preceding 
night,  which  he  may  have  settled.  When  this  is  the  case,  the  clearer  is 
right;  if  not,  he  is  wrong,  and  he  must  discover  the  error.  The  clearer 
v  253 


A  Treat**  o* 

nay  bo  wrong  through   error*  made  either  in  his  own  book  at  tho  Clear. 
ins-hou«*f  or  in  Mi.  U«>ok  at  home.     The  error  at  home  may  be 

either  in  the  "  clearinp-in"  or  in  the  "  clearinp-out."  If  the  ern«r  IKS  in 
.it  will  make  the  Banking-house  wronp;  if  in  tho  clear- 
•i.  it  will  n-'t  Sijipnue,  for  instance,  the  clearing-out  is  wronp,  rut 
;.li.  the  house  will  be  £  1,000  over,  and  tho  clearer  will 
l>e  £1.000  short.  But  if  the  elearinp-in  be  wrong,  cast  £1,000  too 
much,  it  will  not  effect  the  balance  of  the  house,  because  the  Cash-Book 
will,  mnwquently,  be  £  1,000  lew;  and  these  two  amounts,  those  of  the 
Cash-Bonk  and  the  Paid-Day- Book,  (into  which  the  amount  of  the  Clear- 
mg-In-B<>ok  ia  entered,)  are  placed  on  the  same  side  of  the  trial-paper. 
But  tliin  error  will  make  the  clearer  wronp.  The  way  in  which  the 
clearer  discovers  hia  errors  is,  by  marking  off  his  book  against  the  Clear- 
ing-Book, and  by  recasting  both  the  books.  An  error  may  have  occurred 
at  the  Clearing-house.  If  the  clearer  has  placed  a  wrong  balance  on  \\\- 
aheet,  or  has  wrong  cast  his  balance-sheet,  the  Clearing-house  will  be 
wrong,  and  the  inspectors  will  make  it  their  business  to  discover  the  error. 
But  if  the  clearer  has  entered  an  article  wrong  in  his  book,  and  the  rink 
of  the  house  upon  whom  the  draft  is  drawn  has  entered  it  wrong  al.no, 
then  the  Clearing-house  will  be  right,  and  both  these  clearers  will  be 
wrong ;  one  being  as  much  over  as  the  other  is  short. 

All  the  articles  in  the  clearing-out  must  mark  against  either  the  jour- 
nals, the  Received  Waste-Books,  or  the  Lists.  To  secure  greater  accuracy, 
the  clearing-in  is  entered  not  only  in  the  regular  Clearing-Book,  but  also 
in  another  book  by  itself,  which  for  distinction  is  called  the  Clearing-In- 
Book.  The  amount  of  the  clearing-in  is  entered  in  the  Paid-Day-Book 
previous  to  the  daily  balance.  On  the  following  morning,  the  Clearing 
In-Book  is  marked  against  the  debit  side  of  the  Ledger,  and  the  Ledger 
Folio  placed  against  each  entry. 

No  gold,  silver,  or  copper,  is  taken  to  the  Clearing-house ;  the  differ- 
ences under  £  5,  that  may  be  left  between  the  clerks  who  receive  and  pay 
with  each  other  are  carried  to  account  on  the  following  day. 

Country  notes  are  not  paid  at  the  Clearing-house,  but  are  taken  round 
to  the  banking-houses,  and  exchanged  for  tickets  called  memorandums, 
which  are  passed  through  the  afternoon  clearing.  The  following  is  the 
form  of  these  memorandums : — 

London,  lit  May,  1827. 
Due  to  Metirt.  Steady  $  Co. 

One  Thousand  J'oundt. 
For  Country  Notet,  to  be  paid  in  the  clearing  of  thit  day. 

For  Meun.  Hope,  Rich  $  Co. 
&  1,000.  A  Clerk. 

Drafti  that  are  paid  into  the  Banking-house  after  four  o'clock  arc  taken 
to  tbe  house*  upon  whom  they  are  drawn  "  to  be  marked" ;  that  is,  it  is 
acked  if  tbe»e  drafts  will  be  paid  in  the  clearing  of  the  next  day.  It  -<,, 
OM  of  tbe  cleric*  mark*  the  cheque  by  placing  his  initials  upon  it.  If  the 

254 


The  Clearing  House. 

cheque  is  refused  to  be  marked,  it  is  returned  as  dishonored,  on  the 
following  day,  to  the  person  who  has  pai$  it  in.  Had  it  not  been  sent 
to  be  marked,  the  draft  would  not  have  been  refused  payment  until  the 
next  day,  and  it  could  not  be  returned  to  the  customer  till  the  day  after- 
wards. 

The  operations  on  the  Stock  Exchange  cause  a  great  number  of 
cheques  to  be  drawn  on  bankers,  and  thus  increase  the  operations  at  the 
Clearing-house. 

A  person  who  wants  to  buy  £  100  consols,  gives  his  order  to  a  broker, 
and  pays  him  possibly  by  a  cheque  on  his  banker,  which  the  broker  takes 
and  pays  to  his  own  banker.  He  then  buys  the  £  100  consols  from  a 
jobber,  and  pays  him  by  a  cheque.  The  jobber  possibly  replaces  this 
stock  by  buying  a  £  100  consols  from  another  broker  who  is  ordered  by 
his  principal  to  sell  that  amount  of  stock.  The  jobber  gives  the  broker 
his  cheque  upon  his  banker,  and  the  broker  probably  will  give  his  princi- 
pal the  produce  of  the  stock  by  a  cheque.  No  money  has  passed  between 
the  parties,  and  the  result  of  the  whole  is,  that  the  buyer  of  the  stock  has 
£90  less  in  the  hands  of  his  banker,  and  the  seller  has  £90  more.  Four 
cheques  have  been  drawn,  and  these  have  caused  transactions  with  five 
different  bankers.  The  total  number  of  credit  and  debit  operations  in  all 
the  banks  is  eight. 

1.  The  banker  of  the  buyer  of  the  stock  pays  his  cheque  through  the 
clearing,  and  debits  his  customer. 

2.  The  banker  of  the  broker  who  buys  the  stock,  credits  him  with  the 
purchaser's  cheque,  and  debits  him  for  the  cheque  he  gives  to  the  jobber. 

3.  The  banker  of  the  jobber  credits  him  for  the  cheque  he  has  received 
from  the  buying  broker,  and  debits  him  for  the  cheque  he  gives  to  the 
selling  broker. 

4.  The  banker  of  the  broker  who  sells  the  stock  credits  him  for  the 
jobber's  cheque,  and  debits  him  for  the  cheque  he  gives  to  his  customer 
who  is  the  seller. 

5.  The  banker  of  the  seller  credits  him  for  the  cheque  of  the  broker, 
who  has  sold  the  stock,  and  will  debit  him  for  any  cheque  he  may  draw 
against  it. 

Should  neither  the  buyer  nor  the  seller  of  the  stock  keep  a  banker,  then 
only  three  cheques  would  be  drawn. 

Besides  these  daily  transactions  arising  out  of  real  business,  the  brokers 
have  large  transactions  in  what  are  called  "time  bargains."  This  is 
what  is  usually  meant  by  "gambling  in  the  funds."  The  parties  buy  or 
sell  consols  against  the  next  settling  day.  No  real  purchase  or  sale  is 
ever  intended.  When  the  settling  day  arrives,  the  losing  party  has  to  pay 
the  difference  that  has  arisen  from  the  fluctuations  in  the  price.  A  settle- 
ment takes  place  among  the  brokers  in  a  way  somewhat  resembling  the 
settling  between  the  bankers  at  the  Clearing-house.  All  the  differences 
are  paid  by  cheques.  A  broker  may  give  twenty,  thirty,  or  forty  cheques 
to  as  many  different  brokers,  and  he  may  receive  an  equal  number  from 
other  brokers.  All  these  cheques  are  paid  by  the  respective  bankers 
through  the  Clearing-house.  Besides  settling  days  for  consols,  there  are 
also  settling  days  for  foreign  funds,  and  for  shares  in  railway  companies. 

255 


A   Trtatitf.  on  Banking. 

The  diflVrf  tiocn  in  these  caaea  are  also  settled  by  cheques  upon  the  clear- 
ing banker*. 

Mr.  Thomas,  inspector  of  the  Clearing-house,  stated  to  the  Hull  ion 
Committee,  in  the  year  1810,  that  the  average  amount  of  drafts  puid 
every  day  at  the  Clearing-house  was  £  4,700,000 ;  and  the  average 
amount  of  the  balance  paid  in  bank  notes  was  £, 2*20,000.  Sn,.t:m.  * 
the  bank  note*  brought  to  the  Clearing-house  of  an  evening  exciv.i.  .1 
X  500,000,  and  on  settling  days  at  the  Stock  Exchange,  the  amount 
of  drafts  paid  was  above  £  14,000,000,  At  that  time  the  Clearing  house 
had  been  established  thirty-fire  years,  and  the  number  of  clearing  bankers 
wa»  forty-six. 

The  following  is  a  copy  of  a  Clearing  Balance-Sheet,  and  a  List  of  the 
Bankers  who  clear.  The  name  of  the  house  to  whom  each  sheet  belongs 
is  placed  at  the  top,  and  is  then,  of  course,  omitted  in  the  alphabetical 


DEBTORS. 

CREDITORS. 

£.«.<*. 

£        *,        d. 

Barclay. 
Barnard 

Barnetti 

Bosanquet 

Brown 

Curriei 

Fullert 

Olyn 

Ilanbury 

Hankoy 

Jones 

Lubbock 

Maeterman 

Prescott 

Price 

Robert* 

Rogers 

Smith 

Spoon  er 

Stevenson 

.-r.  in- 

Vcre 

Williams 

Willis 

i 

The  following  is  the  amount  of  transactions  passed  through  the  clearing 
by  each  banking-hou.se,  during  the  year  1840  :— 


107.Mt.SM    .....     Barclay. 
1S.MMM    .....     Barnard. 


**••*•,••• 
* 


lUroetU. 

Bosanquet. 

Brown. 

Carries. 

Deanisoa. 


250 


8,000.000 Dorrion. 

000 Fullers. 

105.3IKi.nni) (;]>n. 

•'.mio l!;inhury. 

15,000.0110 ]l.,i.k,y: 

I0<,ooo.0d() ). 

24,200,000 LaUbroke. 


The  Clearing-House. 


33.700.000 Lubbock. 

90.000,000 Masterman. 

30,000.000  .....  Prescott. 

15,300.000 Price. 

80,880,600  ...'..  Robarts. 

9,000,000 Rogers. 

Stevenson. 

16,000,000 Spooner. 

64,000,000  .     .     •    .     .  Smith, 


37,000,000 Stone. 

10,400,000 Vere. 

Weston. 

Whitmore. 

56,000,000 Williams. 

20,500,000 Willis. 


974,580,000 


The  following  is  an  account  of  the  aggregate  demands  made  through  the 
Clearing-house,  and  the  amount  of  bank  notes  with  which  they  were  dis- 
charged, during  the  year  1839  : — 


Demands. 

Bank  Notes. 

January 

£82,762.400 

—£6,348,500 

February 

76,164,700 

—   4,960,200 

March 

75,879,200 

—    5,621,500 

April 

85,839,200 

—   5,836,000 

May 

80.587,600 

—   5,615,000 

June 

67.413,900 

—    5,060,000 

July 

83,865,200 

—   6,284,800 

August 

September 

October 

November 

December 


Demands. 
£87,610,500 
74,237,700 
87,478.200 
81,729,200 
70,833,800 


Bank  Notes. 
—£6.164,900 

—  5,129,800 

—  5.706,800 

—  4,793,100 

—  4,755,000 


£954,401,600       £66,275,600 

A  kind  of  clearing  takes  place  between  the  Bank  of  England  and  some 
of  the  London  bankers. 

Most  of  the  London  bankers  keep  a  drawing  account  with  the  Bank  of 
England:  And  when  cheques  or  bills  are  presented  to  a  banker  for  pay- 
ment by  the  bank,  he  pays  them  by  a  cheque,  which  is  passed  to  the 
debit  of  his  account.  It  is  also  said  that  some  bankers  have  an  agreement 
with  the  bank  that  no  cheque  shall  be  posted  to  their  debit  until  after  three 
o'clock  in  the  afternoon.  Hence,  if  the  bankers  draw  large  cheques  in 
the  morning,  they  can  provide  for  them  in  the  course  of  the  day.  This 
so  far  resembles  a  clearing,  that  no  notes  pass  in  settling  the  daily  trans- 
actions. But  it  is  merely  an  arrangement  between  the  Bank  of  England 
and  each  banker  individually,  and  has  no  reference  to  any  settlement  of 
accounts  among  the  bankers  themselves.  The  following  is  the  evidence 
on  this  subject  given  before  the  Committee  of  the  House  of  Commons,  by 
the  Governor  of  the  Bank  of  England,  in  reply  to  questions  put  by  Mr. 
Glyn,  a  London  banker  : — 

"Mr.  Glyn. — Do  not  the  private  banks  clear  with  the  Bank. of  England,  by  the  use  of 
cheques  upon  the  Bank  of  England  ? — They  have  the  option  of  doing  so. 

"  That  is  a  substitute  for  the  notes  which  would  be  used,  and  that  so  far  economises  th« 
bank-notes  ? — Yes. 

"Does  not  that  observation  also  apply  to  joint-stock  banks?  do  not  they  clear,  through 
the  medium  of  cheques,  upon  the  Bank  of  England? — Yes;  but  as  far  as  regards  clearing, 
it  is  a  question  between  the  joint-stock  banks  and  the  private  bankers. 

"  But  so  far  as  regards  the  private  banks  and  the  Bank  of  England,  the  economy  of 
bank-notes  between  them  is  carried  to  the  greatest  possible  extent,  inasmuch  as  the 
private  banks  use  cheques  upon  the  Bank  of  England? — Yes."  (Commons,  3266- 
3270.) 

The  banks  of  Newcastle  on  Tyne  adopted  a  sdmewhat  similar,  but  a 
more  extensive  plan  of  clearing,  through  the  means  of  the  branch  of  the 
Bank  of  England.     The  plan  was  thus  described  in  a  letter  addressed  to 
me,  about  two  years  ago,  in  reply  to  my  inquiries  on  the  subject : 
v*  257 


A  Treatise  on  Banking. 

•»  The  banks  here  do  not  clear.  They  used  to  do  so,  and  for  that  pur- 
pose  had  a  room  at  Messrs.  Ridley's  bnnk  ;  hut,  from  some  objection 
raised  by  Messrs.  Lamhton*,  the  system  was  discontinued. 

''j  have,  however,  adopted  a  plan  of  exchanges,  which,  from  tin- 
facilities  granted  by  the  branch  bank,  answers  nearly  the  same  purpose  as 
a  clearing,  without  the  e\p. use.  1  must  inform  you  that  they  ull  ha\e 
drawing  accounts  with  the  branch  bank,  and  the  plan  now  adopted  is  as 
MudJet  namely  :  — 

44  At  two  o'clock  every  day,  each  bank  pays  in,  to  its  credit  with  the 
branch  hank,  all  bills  and  cheques  on  other  banks  received  up  to  that 
hour.  The  amounts  so  paid  in  are  passed  to  credit  in  totals,  and  the  bills 
and  cheques  are  then  sorted  into  charges  upon  the  respective  banks,  and 
presented  at  their  counters  by  the  Bank  of  England,  who  receive  in  pay- 
ment a  cheque  upon  themselves.  So  that,  in  tact,  each  bank  is  credited 
in  total  with  what  it  pays  in,  and  debited  with  the  cheque  given  for  what 
it  has  to  pay;  thus  obviating  the  necessity  of  any  bank-notes  passm-_r. 

44  This  of  course  gives  the  branch  bank  some  trouble,  and  they  there- 
fore strictly  confine  the  facility  to  those  banks  issuing  Bank  of  Lngland 
paper ;  and  as  the  Union  Bank  issues  its  own  paper,  it  is  consequently  ex- 
cluded, and  is  obliged  to  exchange  separately  with  the  other  bankers." 

Several  of  the  bankers  at  the  West-end  of  London  keep  an  account 
with  a  City  bank.  They  do  not,  however,  in  all  cases  pass  the  whole  of 
their  transactions  through  the  Clearing-house.  They  pay  and  receive 
with  the  clearing  bankers  individually,  and  sometimes  leave  their  unpaid 
bills  with  their  city  agent  They  occasionally  pay  into  the  City  bank  the 
cheques  they  may  have  on  the  clearing  bankers,  and  on  the  other  bank- 
ers too. 

The  stock-brokers  usually  write  across  every  cheque  they  draw,  the 
name  of  the  banker  of  the  party  in  whose  favor  it  is  drawn ;  and  if  they 

do  not  know  the  name  of  the  banker,  they  write  " &  Co."     The 

banker  on  whom  it  is  drawn  will  then  pay  it  only  in  the  clearing.  If  a 
broker  intends  a  cheque  to  be  paid  in  bank  notes  across  the  counter,  he 
writes  on  it  the  word  4t  cash  "  ;  such  cheques  are  given  only  to  persons 
who  do  not  keep  bankers. 

Many  persons  now  cross  the  cheques  they  draw  with  the  name  of  a 
banker,  to  guard  against  fraud  in  case  the  cheques  should  be  lost  or 
stolen.  The  cheque  can  then  only  be  paid  to  the  banker  whose  name  is 
on  the  cheque.  If  it  be  crossed  with  the  names  of  two  bankers  it  will  be 
refused  payment  to  either,  unless  the  matter  be  satisfactorily  explained. 

Clearing  bankers  never  make  payments  to  each  other,  except  through 
the  clearing. 

The  effects  of  the  clearing-house  are  thus  described  by  Mr.  M'Culloch, 
in  his  Commercial  Dictionary  :  — 

"  ^Lf"  **  hugoit  proportion  both  of  the  inland  bills  in  circulation  in  the  country, 
•4  si*o^flh<i  fordp  bifli  drawn  upon  (in-at  Britain,  are  made  p:rvablc  in  London, 
'  tea*  to  which  all  the  |*-runiarv  tranxactiong  of  tin-  empire  are  nlti;:. 
ht  adjusted.    And  is  order  stilt  further  to  ceonomi.se  tin-  u 
SSkswof  tbs  metropolis  are  in  the  habit  of  sending  n  clerk  eaeh  day  to  the 
00M  ia  Lombard  8trv«t.  who  carries  with  him  the  various  bills  in  the  po»- 


The  London  and  Westminster  Bank. 

session  of  his  house,  that  are  drawn  upon  other  bankers;  and,  having  exchanged  them 
for  the  bills  in  the  possession  of  those  others  that  are  drawn  upon  his  constituents,  the 
balance  on  the  one  side  or  the  other  is  paid  in  cash  or  Bank  of  England  notes.  By 
this  contrivance  the  bankers  of  London  are  enabled  to  settle  transactions  to  the  extent 
of  several  millions  a  day,  by  the  employment  of  not  more,  at  an  average,  than 
£  200,000  to  £  300,000  of  cash  or  bank-notes. 

"  In  consequence  of  these  and  other  facilities  afforded  by  the  intervention  of  bankers 
for  the  settlement  of  pecuniary  transactions  the  money  required  to  conduct  the  busi- 
ness of  an  extensive  country  is  reduced  to  a  trifle  only,  compared  with  what  it  would 
otherwise  be.  It  is  not,  indeed,  possible  to  form  any  very  accurate  estimate  of  the  total 
saving  that  is  thus  effected ;  but,  supposing  that  fifty  or  sixty  millions  of  gold  and  silver 
and  bank-notes  are  at  present  required,  notwithstanding  all  the  devices  that  have  been 
resorted  to  for  economizing  money  for  the  circulation  of  Great  Britain,  it  may,  one 
should  think,  be  fairly  concluded,  that  two  hundred  millions  would,  at  the  very  least, 
have  been  required  to  transact  an  equal  amount  of  business,  but  for  those  devices. 
If  this  statement  be  nearly  accurate,  and  there  are  good  grounds  for  thinking  that  it  is 
rather  under  than  over-rated,  it  strikingly  exhibits  the  vast  importance  of  banking  in  a 
public  point  of  view.  By  its  means  fifty  or  sixty  millions  are  rendered  capable  of 
performing  the  same  functions,  and  in  an  infinitely  more  commodious  manner,  that 
would  otherwise  have  required  four  times  that  sum ;  and,  supposing  that  twenty  or 
thirty  millions  are  employed  by  the  bankers  as  a  capital  in  their  establishments,  no 
less  than  120  or  130  millions  will  be  altogether  disengaged,  or  cease  to  be  employed 
as  an  instrument  of  circulation,  and  made  available  for  employment  in  agriculture, 
manufactures,  and  commerce." 


SECTION  III.  — THE  JOINT-STOCK  BANKS  IN  LONDON. 

LONDON  is  the  head-quarters  of  several  joint-stock  banks,  who  conduct 
their  business  operations  in  the  provinces,  in  Ireland,  or  in  the  colonies. 
But  we  purpose  here  to  notice  only  those  joint-stock  banks  who  carry  on 
business  as  London  bankers.  These  are  five  : — The  London  and  West- 
minster Bank  ;  the  London  Joint-Stock  Bank  ;  the  Union  Bank  of  London  ; 
the  Commercial  Bank  of  London ;  the  London  and  County  Banking  Com- 
pany. 

I.  —  The  London  and  Westminster  Bank.\ 

I.  Its  History.  —  In  the  Act  for  renewing  the  Bank  of  England  Char- 
ter, passed  in  1833,  it  was  declared  to  be  the  law,  that  companies  or  part- 
nerships consisting  of  more  than  six  persons  might  carry  on  the  business 
of  banking  in  London.  Immediately  after  the  passing  of  this  Act,  a  pros- 
pectus was  issued,  proposing  to  form  the  London  and  Westminster  Bank. 
The  shares,  however,  were  taken  up  but  tardily,  and  the  bank  did  not 
commence  business  until  March  10th,  1834,  and  then  only  with  a  paid-up 
capital  of  £  50,000,  and  of  this  capital  a  large  portion  is  said  to  have 
been  subscribed  by  shareholders  who  resided  in  the  country. 

As  the  Bank  Charter  Act  did  not  prescribe  the  way  in  which  companies 
of  more  than  six  persons  were  to  sue  or  be  sued,  the  directors  of  the  London 
and  Westminster  Bank  brought  a  bill  into  Parliament,  in  the  session  of 
1834,  to  authorize  them  to  sue  and  be  sued  in  the  names  of  their  public 
officers,  in  the  same  manner  as  those  banking  companies  that  were  local- 

259 


A  Trcatite  on  Banking. 

•d  beyond  sucty-five  miH  from  London.  This  bill  was  carried  by  large 
TjaWfe*"  through  the  Houae  of  Commons  although  opposed  by  the  influ- 
ence of  the  Bank  of  England,  and  by  Ixml  Althurp,  thm  Chano-Hor  of 
•  i;  \  Tin!  bill,  however,  was  lost  in  thi«  Lords.  In  conse- 

quence of  (Ins  failure,  the  bank  followed  the  plan  of  suing  and  being  sued 
through  the  medium  of  trustees. 

Previous  to  the  commencement  of  business,  the  directors  applied  t<>  tin- 
Committee  of  !  .inkers  fur  admission  to  the  Clearing-house.  This 

ww  refused.  The  directors  also  applied  for  permission  to  have  a  drawing 
account  at  the  Bank  of  England.  This,  too,  was  refused. 

Notwithstanding  these  difficulties,  the  bank  continued  to  advance,  and, 
by  the  date  of  the  First  Annual  Report,  March  4th,  1N;J5,  the  paid-up 
capital,  increased  by  two  colls  of  £  5  each  upon  the  shareholders,  nrnourit- 


At  the  commencement  of  the  year  1835,  the  Bank  of  England  institut- 
ed legal  proceedings  to  prevent  the  London  and  Westminster  Bank  ac- 
cepting bills  drawn  at  less  than  six  months  after  date.  Supported,  how- 
ever, by  the  legal  opinions  of  Sir  John  Campbell,  Sir  William  Pollett,  and 
Mr.  Pemberton,  the  trustees  continued  to  accept  such  bills,  and  resisted 
the  proceedings  of  the  Bank  of  England. 

By  the  end  of  December,  1835,  the  number  of  shares  issued  had  in- 
creased to  17,818.  Soon  afterwards  the  directors  made  a  fourth  call  of 
£  5  per  share,  payable  the  following  April.  This  made  £2Q  paid  upon 
each  share,  and  the  whole  paid-up  capital  exceeded  «£  -100,000.  The  div- 
idend on  the  year  ending  December,  1835,  was  at  the  rate  of  4  per 
cent 

At  the  commencement  of  the  year  1836,  the  bank  extended  its  branch- 
es. In  addition  to  the  branch  at  Waterloo-place,  Pall  Mall,  opened  on  the 
same  day  as  the  head  office  in  Throgmorton  Street,  the  bank  opened,  on 
the  4th  of  January,  a  branch  at  213  High  Holborn,  and  another  at  87, 
Whitechapel  ;  and  on  the  29th  of  February,  another  was  opened  in  Wel- 
lington Street,  Southwark.  In  the  following  June  a  branch  was  opened  at 
155  Oxford  Street  In  this  year  the  bank  obtained  a  large  accession  of 
country  business,  in  consequence  chiefly  of  the  formation  of  a  great  num- 
ber of  new  joint-stock  banks  throughout  the  country.  In  this  year,  too, 
the  directors  issued  9,333  shares  at  a  premium  of  £4  10*.  per  share,  by 
which  the  sum  of  £41,998  10*.  was  realized  as  premiums.  The  total 
paid-up  capital  on  December  31st,  1836,  amounted  to  £597,225,  on 
which  a  dividend  was  paid  at  the  rate  of  5  per  cent. 

In  the  beginning  of  the  year  1837,  the  suit  brought  by  the  Bank  of 
England  was  terminated,  by  the  Master  of  the  Rolls  granting  an  injunc- 
tion to  restrain  the  London  and  Westminster  Bank  from  accepting  bills  at 
less  than  six  months  after  date.  The  country  joint-stock  banks  then 
adopted  the  practice  of  drawing  upon  the  London  and  Westminster  Bunk 
**  without  acceptance,"  in  the  same  way  as  the  Bank  of  Ireland  draws 
upon  the  Bank  of  England.  No  practical  difficulty  was  experienced,  and 
the  London  and  Westminster  Bank  lost  none  of  its  connections  in  conse- 
quence of  this  adverse  decision.  At  the  end  of  the  year  the  directors  de- 
clared the  usual  dividend  of  5  per  cent 

260 


The  London  and  Westminster  Bank. 

On  the  26th  of  December,  1838,  the  bank  removed  its  business  from 
No.  38  Throgmorton  Street,  to  their  new  building  in  Lothbury.  In  the 
report  delivered  in  March,  1839,  the  directors  refer  in  the  following  terms 
to  the  then  condition  of  the  bank  :  — 

"  The  pleasure  which  the  directors  feel  in  making  their  Fifth  Annual 
Report  is  augmented  by  the  circumstance  of  its  being  delivered  to  the 
proprietors  in  their  own  building,  an  event  that  seems  to  justify  a  glance 
at  the  past  history  of  the  bank. 

"  When  the  directors  consider,  that  during  the  five  years  of  the  existence 
of  this  establishment,  they  have  had  to  contend  against  the  fears  and  prej- 
udices of  the  public  mind,  the  uncertainties  and  the  intricacies  of  the  law, 
and  the  opposing  influence  of  existing  interests  ;  and  that  this  conflict  has 
been  carried  on  in  seasons  of  great  commercial  embarrassment,  and  under 
circumstances  of  peculiar  difficulty ;  and  that,  amid  all  these  disadvan- 
tages, they  have  nevertheless  acquired  a  paid-up  capital  of  nearly  six  hun- 
dred thousand  pounds,  between  eight  and  nine  hundred  respectable  pro- 
prietors, a  large  and  increasing  business  in  London,  and  a  country  con- 
nection that  embraces  one  hundred  and  fifty  banks  and  branches,  they  do 
feel  that  the  result  of  the  first  experiment  of  establishing  a  joint-stock  bank 
in  London  has  been  highly  satisfactory,  and  that  the  confidence  they  ex- 
pressed in  their  First  Annual  Report  has  been  abundantly  confirmed." 

The  same  report  makes  the  following  allusion  to  the  other  joint-stock 
banks  established  in  London  :  — 

"  It  may  be  expected  that  some  notice  should  be  taken  in  this  report  of 
the  extension  of  the  system  of  joint-stock  banking  in  London.  This  will 
not,  in  the  opinion  of  the  directors,  militate  against  our  interests,  as  those 
principles,  which  we  were  the  first  to  advocate,  will  be  thus  more  widely 
disseminated.  Hence  all  banking  companies  that  may  be  respectably  and 
honorably  conducted  will  be  regarded  by  this  bank,  not  as  rivals,  but  as 
allies.  At  the  same  time,  the  shareholders  should  bear  ift  mind,  that  as 
joint-stock  banks  multiply  in  London,  each  bank  will  have  to  depend 
mainly  upon  the  support  of  its  own  proprietary.  And  the  London  and 
Westminster  Bank  having  been  first  in  the  field,  ought  not  to  suffer  itself 
to  be  passed  in  the  course  by  later  and  more  youthful  competitors.  But 
if  the  exertions  of  our  shareholders  be  at  all  proportionate  to  their  num- 
bers, their  wealth,  and  their  respectability,  the  London  and  Westminster 
Bank  will  not  only  have  the  honor  of  being  the  first  joint-stock  bank  in 
London  in  the  order  of  time,  but  in  other  respects  also  will  be  enabled  to 
maintain  the  preeminence." 

In  March,  1840,  the  dividend  was  raised  to  6  per  cent,  upon  the  profits 
of  the  preceding  year ;  and  this  rate  has  since  been  constantly  main- 
tained. In  1841  the  directors  issued  ten  thousand  of  the  unappropriated 
shares  at  par  to  the  existing  shareholders,  in  the  proportion  of  one  new 
share  to  the  holder  of  three  shares.  This  raised  the  number  of  shares 
issued  to  40,000,  and  the  paid-up  capital  to  £  800,000.  In  February, 
1842,  the  bank  opened  a  drawing  account  with  the  Bank  of  England. 

In  the  report  delivered  March,  1841,  the  directors  observe,  —  "  During 
the  past  year  the  banking  institutions  of  the  country  have  occupied  a  large 
portion  of  public  attention.  The  directors  trust  that  the  events  and  dis- 

261 


A  Treatise  on  Banking. 

that  have  taken  place  will  hnve  the  effect  of  diffusing  a  correct 
knowledge  of  the  principle*  of  joint-stock  banking,  and  that  institutions 
like  the  London  and  Westminster  Bunk  will  be  allowed  to  exercise  the 
same  legal  rights  and  privileges  which  arc  accorded  to  other  hanking  es- 
ttblwhmrnv"  In  the  Mine  year,  Mr.  Gilbart,  the  general  manager,  was 
••mined  for  four  days  before  a  Select  Committee  of  the  1 1 ,,•!-•  . ,f  (  \,m- 
mona,  at  the  request  of  a  meeting  of  deputies  from  the  joint-stock  hank-. 
In  the  report  of  March,  1844,  we  read,  —  "As  the  speech  from  the 
throne  has  called  the  attention  of  Parliament  to  '  the  state  of  the  law  with 
rpnrd  to  the  privileges  of  the  Bank  of  Knirlaml  and  to  other  banking  es- 
ttfsnshments,'  the  directors  have  cooperated  with  the  represrntati\> 
other  joint-stock  banks  in  bringing  under  the  consideration  of  the  Govern- 
mant  the  defects  of  the  laws  relating  to  banking  companies,  which  they 
feel  sure  the  Legislature  will  not  refuse  to  remedy."  In  this  year  the 
bank  obtained  the  power  to  draw,  accept,  or  indorse  any  bills  of  exchange 
not  payable  to  bearer  on  demand  ;  and  immediately  commenced  accept- 
ing the  bills  drawn  by  its  country  connections,  and  issuing  circular  \<  • 
of  credit  for  the  use  of  travellers  and  residents  on  the  continent.  In  the 
year  the  bank  obtained  the  power  of  suing  and  being  sued  in  the 
of  its  public  officers,  and  accordingly  registered  the  names  of  its 
trustees  for  that  purpose. 

In  addition  to  the  usual  dividend  of  6  per  cent.,  the  directors  gave  in 
March,  1847,  a  bonus  of  2  per  cent  out  of  the  profits  of  the  preceding 
year.  At  the  same  time  they  announced  the  distribution  of  the  remain- 
ing ten  thousand  unappropriated  shares  at  par  among  the  existing  share- 
holders, in  the  proportion  of  one  new  share  to  every  four  shares  pre- 
viously  held.  This  raised  the  paid-up  capital  of  the  bank  to  one  million 
tterling. 

On  the  31st  of  December,  1817,  Messrs.  Young  &  Sons  (formerly 
Messrs.  Westoft  &  Young),  of  South wark,  retired  from  business,  and  the 
customers  of  the  bank,  according  to  the  wishes  of  Mr.  Young,  transferred 
their  accounts  to  the  Southwark  Branch  of  the  London  and  Westminster 
Bank. 

At  a  general  meeting  held  on  the  1st  of  March,  1848,  the  report  an- 
nounced  that,  with  the  exception  of  outstanding  instalments  amounting  to 
£  3,273,  the  paid-up  capital  of  the  bank  was  one  million  sterling.  A  divi- 
dend at  the  usual  rate  of  6  per  cent  was  declared,  and  £4,223  4s.  lOd. 
was  added  to  the  surplus  fund. 

The  chairman  stated  that,  in  the  week  preceding  the  letter  of  the  Gov- 
ernment suspending  the  act  of  1844,  the  bank  had  sold  Government  secu- 
rities to  a  large  amount,  which  could  not  afterwards  be  replaced  but  at  an 
advanced  price.  The  loss  thus  occasioned  amounted  to  nearly  .£20,000. 
The  following  is  the  paragmph  in  the  report  referring  to  this  sub- 
ject:— 

Prom  the  severe  pressure  on  the  money  market  during  the  latter  part 
of  the  year,  it  was  deemed  advisable  to  realize  some  portion  of  our  Gov- 
ernment securities;  and  although  the  profits  of  the  year  have,  conse- 
quently, been  curtailed,  yet  the  directors  feel  assured  that  thr:  liberality 
which  they  were  thus  enabled  toVjxerci.se  towards  its  customers  will  tend 

MB 


The  London  and  Westminster  Bank. 

to  the  advantage  of  the  bank.  The  whole  of  the  stock  that  was  sold  has 
since  been  replaced." 

At  this  me'eting  the  proprietors  recommended  to  the  directors  that  the 
general  meetings  should  be  held  half-yearly,  and  that  the  first  meeting 
should  be  held  earlier  in  the  year.  The  directors  accordingly  called  a 
special  meeting  on  the  19th  of  July,  for  the  purpose  of  receiving  a  half- 
yearly  report,  and  for  making  such  alterations  in  the  deed  of  settlement  as 
would  enable  the  proprietors  to  meet  on  the  third  Wednesday  in  January, 
instead  of  the  first  Wednesday  in  March.  Th/siresult  of  this  resolution  is, 
that  the  annual  general  meeting  of  the  bank  will  in  future  be  held,  under 
the  deed,  on  the  third  Wednesday  in  January,  and  a  half-yearly  meeting 
may  be  called  specially  by  the  directors  either  on  the  third  Wednesday  in 
July,  or  on  any  other  day,  whenever  it  shall  be  deemed  necessary  or  ex- 
pedient. 

From  this  half-yearly  report  it  appeared,  that,  from  losses  in  the  pre- 
vious year,  it  had  become  necessary  to  take  .£5,161  3s.  Id.  from  the  sur- 
plus fund  to  make  up  the  half-yearly  dividend.  But  in  the  second  half- 
year  the  profits  exceeded  the  dividend  by  .£7,237  3s.  2d.,  making  on  the 
whole  of  the  year  1848  an  addition  to  the  surplus  fund  of  .£2,076  Os.  Id., 
after  paying  the  dividend  of  6  per  cent,  on  the  increased  paid-up  capital 
of  £  1,000,000. 

II.  Its  Principles.  —  At  the  time  the  London  and  Westminster  Bank 
was  announced,  it  was  contended  by  the  advocates  of  the  previous  system 
that  the  principles  of  joint-stock  banking  were  wholly  inapplicable  to  the 
wants  and  habits  of  the  population  of  London.  Had  the  founders  of  this 
bank  possessed  zeal  without  discretion,  they  would  probably  have  disre- 
garded the  peculiarities  of  the  field  of  their  operations,  and  have  adopted 
entirely  the  system  of  banking  so  long  acted  upon  in  Scotland.  They 
seem,  however,  to  have  combined  the  enlightened  views  of  statesmen 
with  the  caution  and  practical  knowledge  of  men  of  business.  Hence, 
they  followed  or  discarded  the  principles  of  Scotch  banking  according  as 
they  found  them  adapted,  or  otherwise,  to  the  local  circumstances  of  the 
London  population.  They  seemed  not  so  anxious  to  introduce  a  new  sys- 
tem of  banking,  as  to  guard  against  the  imperfections  of  the  one  previous- 
ly in  existence.  From  the  original  prospectus  and  other  documents  issued 
by  the  company,  we  lea'rn  that  the  following  principles  were  those  ulti- 
mately adopted. 

1.  That  the  bank  should  consist  of  an  unlimited  number  of  partners. 
This  is  essential  to  its  character  as  a  joint-stock  bank.  It  was  ascertained 
that  within  the  previous  twenty  years  about  twenty  private  banking  houses 
had  stopped  payment  in  London  ;  that  by  most  of  these  failures  the  public 
had  sustained  considerable  losses,  and  that  great  difficulties  and  embar- 
rassments had  been  occasioned  by  the  interruption  to  business  and  the 
want  of  confidence  which  these  failures  had  occasioned.  A  bank  com- 
posed of  several  hundred  partners,  all  of  whose  property  would  be  an- 
swerable for  its  obligations  to  the  public,  seemed  the  most  effectual  way 
of  preventing  the  recurrence  of  these  evils.  To  show  the  strength  of  the 
company  and  the  extent  of  the  confidence  to  which  they  are  entitled,  a 
list  of  the  shareholders  is  published  with  the  annual  report  of  the  directors. 

263 


A  TVeotfw  on  Banking. 

the  Act  of  1844,  these  names  have  also  !><-.-n  published  at  the 
of  oach  year  in  a  Suppli-im-nt  to  tin-  R«i/n/  (tn-.rttr. 
The  following  is  an  analyst*  of  those  published  in  th<>  \<  1847:  — 
>  ...  IJii;  !••.  ,:r..  •!  u-ii  •  •:.  It!  :  u  •'•  •  «  -.  oV. ;  <-!«TL->  in-  n,  .'U  :  im-.li- 

cal  men,  13;  natal  and  military  officers,  45 ;  solicitors,  barristers,  and 
writer*  to  the  signet,  9 ;  mon  of  title,  12;  gentlemen  and  others,  781: 
making  a  total  of  1,066.  These  are  resident  as  follows :  — 

la  Loadoa,  sad  within  ftnss»imil<»  In  Ireland 11 

In  other  countries,        .        .        .         18 

Total,         .        .    1,066 


675 

In  other  parts  of  England,  .        .      380 
la  Scotland, 42 


2.  A  second  principle  adopted  was,  that  the  bank  should  have  a  large 
paid-up  capital. 

It  was  observed  that  the  London  bankers  did  not  carry  on  business 
with  their  own  capital,  but  merely  upon  their  credit :  they  were  supposed 
to  be  men  of  property,  and,  in  some  cases,  this  supposition  constituted  the 
whole  of  their  working  capital.  Hence,  in  some  instances,  London  bank- 
ers had  stopped  payment  who  were  perfectly  solvent ;  hut  tli.-ir  property 
was  not  engaged  in  their  business,  and  could  not  suddenly  be  rculi/r.]  to 
pay  their  debts.  To  obviate  these  inconveniences,  to  be  prepared  at  all 
times  for  a  withdrawal  of  its  deposits,  to  be  able  to  give  adequate  accom- 
modation to  its  customers,  and  to  support  public  confidence  in*  seasons  of 
extreme  pressure,  a  large  paid-up  capital  was  deemed  requisite.  No  idea 
seems  to  have  been  entertained  of  remaining  satisfied  with  a  small  capital 
in  order  to  pay  larger  dividends.  The  directors  do  not  appear  to  have 
regarded  themselves  as  mere  agents,  employed  to  obtain  the  most  rapid 
return  for  a  sum  of  money  ;  but  they  acted  as  the  founders  of  an  estab- 
BnVnent  destined  to  take  a  high  rank  among  the  national  institutions  of 
the  country.  The  capital  of  the  bank  was  fixed  at  £  5,000,000  sterling, 
divided  into  50,000  shares  of  £  100  each.  All  these  shares  are  in 
the  hands  of  the  partners,  and  the  paid-up  capital  of  the  bank  is  thus 
£  1,000,000,  with  a  power  in  the  directors  of  calling  up  an  additional  sum 
of  £  4,000,000  sterling. 

8.  It  was  observed  that  the  London  private  banks  were  adapted  only 
for  the  rich.  An  indispensable  condition  of  having  an  account  was  that  a 
certain  sum  should  be  kept  unproductive  in  the  banker's  hands.  Thus  the 
middle  class  of  society,  who  had  the  means  of  employing  the  whole  of 
their  capital  in  their  respective  occupations,  were  altogether  excluded  from 
the  advantages  of  banking.  To  remedy  this  defect,  the  London  and 
Westminster  Bank  determined  to  open  accounts  with  persons  who  had 
not  the  means  of  keeping  large  balances  unemployed,  but  who  were 
willing  to  pay  the  bank  a  small  commission  for  conducting  their  ac- 
counts. The  principle  of  commission  is  not  practised  in  Scotland  with 
regard  to  current  accounts,  as  the  banks  look  for  payment  chiefly  by  the 
•sue  of  their  notes.  In  this  country  the  principle  is  adopted  in  the  provin- 
ces, and  even  by  the  London  bonkers  in  regard  to  their  country  accounts. 
The  application  of  this  principle  to  London  accounts  was  an  improvement 
introduced  by  the  London  and  Westminster  Bank,  and  it  brought  the  ad- 

264 


The  London  and  Westminster  Bank. 

vantages  and  conveniences  of  banking  within  the  grasp  of  a  large  class  of 
the  community  to  whom  they  were  previously  denied.  The  expense  of 
keeping  a  banking  account  was  also  reduced  by  the  prohibition  of  pres- 
ents or  Christmas  boxes  to  the  clerks.  Although  the  system  of  Christmas 
boxes  is  sanctioned  by  the  Bank  of  England  as  well  as  by  the  private 
bankers,  it  is,  we  consider,  a  practice  more  honored  in  the  breach  than  in 
the  observance.  Whether  these  presents  are  regarded  as  taxes  upon  the 
customers,  or  as  charitable  donations  to  the  clerks,  they  were  deemed  to 
be  equally  objectionable. 

4.  A  further  attempt  was  made  to  popularize  the  system  of  banking  in 
London,  by  allowing  interest  upon  small  sums  of  money  lodged  on  de- 
posit receipts.      All  the  witnesses  examined  before  the  Parliamentary 
Committees  of  1826  had  borne  testimony  as  to  the  beneficial  effects  of 
this  system  in  Scotland.     And  although  the  London  and  Westminster 
Bank,  not  being  a  bank  of  issue,  could  not  regard  these  small  deposits  as 
an  instrument  of  increasing  its  circulation  of  notes,  yet  it  was  thought  that 
the  system  might  be  rendered  a  source  of  profit  to  the  bank,  and  certainly 
an  advantage  to  the  community.     The  savings  banks  could  receive  no 
more  than  £  30  from  a  depositor  in  each  year,  and  only  £  150  in  the 
whole.     Those  parties  who  had  further  sums  they  wished  to  deposit  in  a 
place  of  security  upon  the  principle  of  receiving  interest  on  the  sums  thus 
lodged,  were  provided  with  such  a  place  in  the  London  and  Westminster 
Bank.     Sums  from  £  10  to  £  1,000  are  received  on  deposit,  and  interest 
allowed  at  a  known  rate,  and  they  are  at  all  times  repayable  upon  demand 
without  notice. 

The  London  and  Westminster  Bank  have  not  adopted  the  system  of 
cash  credits  as  practised  in  Scotland.  These  credits  are  valued  by  the 
Scotch  banks  chiefly  as  an  instrument  for  the  issue  of  their  notes ;  and  it 
may  be  questioned  whether  the  system  can  be  rendered  a  source  of  profit 
to  a  non-issuing  bank  without  imposing  heavy  charges  in  the  form  of  in- 
terest and  commission  upon  the  customers. 

5.  While,  however,  the  founders  of  the  bank  were  thus  regardful  of  the 
industrious  classes  of  the  community,  they  were  not  inattentive  to  the  in- 
terests of  the  wealthy.     Professional  men,  merchants,  and  gentlemen  of 
fortune  have  often  large  sums  of  money  in  their  hands  for  a  short  time, 
waiting  favorable  seasons  of  investment.      For  these  sums  the  private 
bankers  would  allow  no  interest.     The  London  and  Westminster  Bank 
determined  to  take  temporary  or  permanent  lodgments  of  sums  of  £  1,000 
and  upwards,  upon  special  agreement  as  to  the  rate  of  interest  and  time 
of  repayment.     The  rate  of  interest  is  usually  governed  by  the  state  of 
the  money  market,  and  the  principal  is  repaid  at  a  fixed  time,  or  at  a  few 
days'  notice,  as  may  be  agreed  upon.     Parties  may  lodge  money  upon  an 
interest  account  who  have  no  current  account,  and  those  who  have  cur- 
rent accounts  may  transfer  any  portion  of  their  balance  to  an  interest  ac- 
count ;  but  the  bank  allows  no  interest  on  the  balance  of  a  current  ac- 
count.    It  is  considered  that  a  large  portion  of  the  fluctuating  balance  of  a 
current  account  must  be  kept  in  the  till  to  meet  the  daily  cheques  drawn 
by  the  customers ;  that  the  remainder  must  be  invested  in  the  most  avail- 
able, and  therefore  the  least  productive  securities  ;  and  that  considerable 

w  265 


A  Traalin  on  Bunking. 

M  incurred  by  books,  rlwvjwM,  ml-  iiduetm-.,'  these 

:  tin«l  hrnop  {lint  the  brink  rould  not  afford  to  jji'isnt  any  rate  of 
>  it  would  be  worth  while  for  the  <••  .A 

i!  .  may  have  l«<-  a. -counts, —  a  curn-nt  account,  ami  a  de- 

posh  ace  '  i»on  one  he  receives  interest,  upon  I'M-  other  the  re- 

oeives  none.     The  London  and  \\Vstminster  Hank  think  it  l» •::< -r  to  keep 
thfuft  two  accounts  distinct,  than  to  adopt  any  system  of  amalgam*) 

6.  Another  principle  of  the  Iwuik —  not  announced  in  tin-  pro-; 
but  adverted  to  in  some  of  the  Annual  Reports  —  is  that  of  keep., 
large  portion  of  its  funds  at  all  times  in  a  convertible  state.     In  tin;  Re- 
port of  March,  1839,  the  directors  state,   "Although  a  low  rate  of  in- 
tcrrst  prevailed  duniiu  the  last  year,  the  directors  did  not  allow  the  desire 
of  making  large  profits  to  tempt  them  into  advances  upon  inferior  securi- 
ties, or  to  lock  up  their  funds  in  inconvertible  investments  ;  they  feel  as- 
tared,  that  any  departure  from  sound  principles  in  banking,  e\«  n  when 
attended  with  immediate  profit,  must  always  rrsu/t  in  loss  to  the  proprie- 
tor*, and  danger  to  the  establishment."     Again,  in  the  Report  delivered 
in  March,  1844,  we  read,  "Throughout  the  whole  of  last  year  money 
was  exceedingly  abundant,  and,  consequently,  cheap.     15  it  although  a  low 
value  of  money  affects  most  severely  those  banks  that  have  the  largest 
paid-up  capital,  and  which  have  been  so  managed  as  to  retain  the  full  com- 
mand of  their  funds,  yet  the  directors  did  not  suffer  the  desire  of  ol>tain:i>ir 
a  higher  rate  of  interest  to  betray  them  into  advances  upon  doubtful  or  in- 
convertible securities."     In  conformity  with  this  principle,  we  find,  from 
the  account  of  assets  and  liabilities  attached  to  the  Annual  Reports  of  the 
directors,  that  the  amount  invested  in  (Jovernment  securities  is  consider- 
ably more  than  the  whole  capital  of  the  bank.     The  propriety  of  such  a 
course  must  have  been  abundantly  evident  during  the  existence  of  the 
bank,  for  it  would  be  impossible  to  find  so  many  "pressures"  on  the 
market,  or  so  much  fluctuation  in  the  value  of  money,  within  any  similar 
period  in  the  history  of  banking.     It  may  be  presumed  that  the  directors 
•poke  from  their  own  experience,  when  they  stated  in  their  Kejxtrt  of 
March,    1840,   "The  years   1837  and    1838  were    remarkable   for  the 
abundance  and  cheapness  of  money,  and  the  year  1839'  for  scarcity  and 
pressure.    Neither  of  these  extremes  is  favorable  to  large  banking  profits  : 
a  state  in  which  money  is  easy  without  being  abundant,  and  valuable 
without  being  scarce,  is  most  conducive  to  the  welfare  of  both  the  hanking 
and  the  commercial  interests  of  the  country." 

7.  The  last  principle  we  shall  mention  as  adopted  by  the  London  and 
Westminster  Bank  is  the  system  of  branches. 

Thi»  system,  to  the  extent  to  which  it  is  now  carried,  doos  not  -••> -m  to 
have  been  contemplated  by  the  original  founders  of  the  bank.  The  first 
prospectus  announced  merely  that  a  bank  would  be  established  in  the 
.  with  a  branch  at  the  West-end  of  the  town.  But  a  power  to  estab- 
lish other  branches  was  inserted  in  the  deed  of  settlement,  and  it  was  soon 
observed,  that,  from  the  increasing  extent  and  business  of  London,  there 
were  districts  which  were  inadequately  supplied  with  banking  accommo- 
dation. In  these  districts  the  inhabitants  were  compelled  either  to  forego 
all  banking  facilities,  or  to  submit  to  the  inconvenience  of  keeping  their 

•M 


The  London  and  Westminster  Bank. 

account  with  a  bank  at  a  distance  from  their  habitation.  It  was  to  meet 
the  public  wants,  more,  perhaps,  than  with  any  sanguine  expectation  of 
reaping  any  large  amount  of  immediate  profit,  that  the  directors  extended 
their  branches.  Peradventure,  too,  it  was  feared  that  unless  the  London 
and  Westminster  Bank  occupied  these  districts,  the  inhabitants  might  he 
induced  to  form  among  themselves  small  joint-stock  banks  with  inade- 
quate capital,  and  thus  have  impaired  the  respectability  of  the  system. 
In  one  instance  this  in  fact  actually  occurred.  The  mode  of  conducting 
business  is  the  same  at  the  branches  as  at  the  City-office.  A  customer's 
cheque  can  be  paid  only  at  the  branch  on  which  it  is  drawn,  but  he  may 
have  money  placed  to  his  cred.it  with  that  branch  at  any  of  the  other  es- 
tablishments. Those  country  notes  that  are  made  payable  at  the  London 
and  Westminster  Bank,  are,  as  matter  of  courtesy,  paid  at  any  of  the 
branches.  Each  branch  makes  both  daily  and  weekly  returns  of  its 
transactions,  which  are  laid  before  the  directors  ;  and  the  affairs  of  all  the 
branches  are  subjected  to  the  personal  inspection  of  the  general  manager : 
at  the  same  time  all  the  arrangements  tend  to  localize  the  branches,  so  as 
to  give  them  as  much  as  possible  the  character  of  independent  banks. 
The  managers  are  selected  for  their  experience  in  banking,  and  they  give 
immediate  replies  to  the  inquiries  of  both  their  customers  and  the  public. 
They  are  ready  to  afford  every  facility  to  the  parochial  and  other  authori- 
ties, in  conducting  the  financial  arrangements  of  the  districts.  They  al- 
low the  same  rate  of  interest  on  deposits  which  is  allowed  at  the  City- 
office  :  and  in  making  advances  or  discounts,  they  are  not  restricted  to  the 
amount  which  their  own  funds  can  supply.  Thus  each  district  has,  in  a 
branch  bank,  all  the  advantages  that  could  be  derived  from  an  independent 
local  bank,  combined  with  the  additional  security  and  accommodation  to 
be  obtained  from  a  more  extended  and  wealthy  establishment. 

Most  of  the  branches  have,  since  their  establishment,  transferred  their 
business  to  other  premises. 

The  Westminster  Branch  was  opened  on  the  10th  of  March,  1834,  at 
No.  9,  Waterloo-place,  Pall  Mall,  and  was  removed  to  its  present  premises, 
No.  1,  St.  James's-square,  on  the  30th  of  December,  1844. 

The  Bloomsbury  Branch  was  opened  on  the  4th  of  January,  1836,  at 
No.  213,  High  Holborn ;  and  the  adjoining  house,  No.  214,  was  added 
for  transacting  business  with  the  public  on  the  1st  of  October,  1838. 

The  Southwark  Branch  was  opened  on  the  29th  of  February,  1836,  at 
No.  12,  Wel\ington-street,  in  the  Borough,  and  was  removed  to  No.  3,  in 
the  same  street,  on  the  26th  of  December,  1839. 

The  St.  Marylebone  Branch  was  opened  on  the  15th  of  June,  1836,  at 
No.  155,  Oxford-street,  and  was  removed  to  No.  4,  Stratford-place,  Ox- 
ford-street, on  the  23d  of  April,  1844. 

Though  the  system  of  branches  appears  to  be  an  extension  of  the  orig- 
inal views  of  the  Directors,  yet  the  principles  on  which  the  business  is 
.conducted  have  undergone  no  change.  It  is  a  proof  of  the  consideration 
and  practical  knowledge  brought  to  bear  upon  the  subject,  in  the  first  in- 
stance, that  no  alteration  or  improvement  has  since  been  found  necessary. 
The  success  of  the  company  has  been  attributed  more  to  the  general  ap- 
probation with  which  these  views  have  been  received  than  to  any  extended 

267 


A  TruUue  on  Banking. 


MMHn  of  private  solicitation.  Thin,  if  correct,  must  l»o  the  more  gratify* 
ing  to  the  directory  as  the  prosperity  uf  the  bunk  is  thus  u  public  homage 
to  the  •oundneai  of  its  prin<-ipli-«. 

111.  In  Government.  —  The  government  of  the  lunik  is  in  a  board  of 
director*,  niHMlrting  of  not  (Vwrr  tlmn  twelve  members.  Thrco  go  out 
annually  by  rotation,  but  are  eligible  for  n n.-ction.  The  present  number 
n  fifteen,  but  it  can  be  increased  at  any  time  by  a  vote  of  the  gem  ml 
meeting  of  proprietors.  There  is  no  govenior,  or  deputy-governor,  or 
permanent  chairman.  Five  of  the  directors  arc  trustees,  and  are  also 
registered  aa  the  public  officers  of  the  company,  in  whose  names,  or  any 
one  of  them,  the  bank  may  sue  and  be  sued.  The  payment  of  the  direc- 
tor* is  fixed  by  the  shareholders  at  their  general  un  <  tin^s.  This  sum 
was  voted  annually  until  the  year  1839.  Up  to  that  year  inclusive  the 
annual  profits  are  Mated  in  the  reports  before  the  payment  to  the  directors 
n  deducted.  In  subsequent  years  these  payments  are  deducted  first,  and 
the  profits  are  announced  "  after  defraying  the  whole  expense  of  manage- 
ment, including  payment  to  directors.11 

By  the  resolutions  of  the  general  meetings  appended  to  the  Annual  Re- 
ports, it  appears  that  the  first  payment  to  tin-  directors  was  a  sum  of 
£2,500,  voted  at  the  general  meeting  in  March,  1836,  for  the  services 
rendered  in  the  two  preceding  years.  la  subsequent  years,  the  payment 
was  £2,500  annually,  until  March,  1817,  when  the  sum  of  <£  4,500  was 
voted  for  the  year  1846,  and  the  same  amount  was  to  be  continued  in 
each  future  year.* 

A  Table,  Aowiy  At  amount  of  Paid-it/i  Capital,  Annual  Profits,  Dividend^  and  Surplus 
Hmd,  of  (Me  Lou  DOW  AND  WESTXINSTBB  !UNK,O/»  the  31  *t  of  December  in  each        • 
from  U*  Opening  of  the  Bank. 
DM*.  Paid  up  Capital 


£ 
L8MN 
MfJTQ 
WJJUS 

117,180 

:,  .:  M 


i     '  .   - 


wtjm 

>•.  i  « 

"'"  .....  I 

800,000 

no  00 

'  .....  -' 

HI  :.., 

m  rn 


•rofiu  of  the  Yew  t              Dlrldenda. 

£ 

ft 

rf. 

£ 

.«. 

./. 

3,540 

1 

6 

MM 

is 

1 

n  MO 

in 

0 

10,818 

1^ 

0 

32,433 

11 

1 

:.'  '.•"'>  4 

0 

0 

;}2,4"t 

in 

8 

29,864 

0 

0 

13,639 

11 

11 

2'.».864 

0 

0 

4-  ii  i-i 

3 

0 

35,836 

11 

1 

4  -v  '...".I 

s 

10 

35,836 

LI 

0 

51,300 

0 

9 

41.507 

1 

0 

55,118 

II 

VI 

4S.OIM) 

0 

0 

51,696 

1 

7 

48,000 

0 

0 

51.081 

is 

11 

48.000 

n 

II 

66,344 

1 

0 

48,000 

0 

0 

72,175 

i:> 

9 

48,000 

0 

n  i 

. 

.. 

16,000 

0 

0  J 

.''-.-'.'  1 

4 

10 

54,000 

0 

o' 

62,076 

0 

0 

60,000 

0 

0 

Surplus  Fund. 
£     i.    d. 

1,205     8     5 

I.'.MI;    6 

4.:.J7      ii 

7,067  11 

30.839     4 

33,100  11 

46,215     3 

:   \i: 

63,126  K)  10 

66,822  16     5 

<   15     4 

88,248  16     4 

98,424  12     1 


•88,650     7     0          585,926  10     1 


100.647  16  11 
102,723  16  11 

102,723  16  11 


•  Tb«  abort  article  WM  prefixed  to  a  volume  of  the  Reports  ami  otlicr  puMir  docu- 
•eatt  prtotod(aot  paMuhed)  in  1847,  uml.-r  tin-  title  of  ••  A  K.-mnl  of  tli.-  1'n-..  ,,!!.,-< 
Hnt  Thirtren  Yean  of  the  London  on<l  W.-tminMcr  Hunk,  with  1'ortruito  of 
its  Principal  Offlocrv" 

TfcMt!2l?l1!S.l^!.'*rw^taf  •"•WoeUow,  ladudioK  the  payment  to  diroctow,  th«  In- 
OMv-tM.  Mrf  £  WOO  UMMiib  UM  prWrnlMrr  WPMIM/ 
J  TkM  MMM  *ctml-  •  Mm  at  £  1,308  uk at  fmm  prMnium.  oe  than*  »UL 

888 


The  London  and  Westminster  Bank. 

Mr.  James  William  Gilbart  has  been  the  General  Manager  of  the  Bank 
from  its  commencement.  He  was  previously  the  manager  of  the  Water- 
ford  Branch  of  the  Provincial  Bank  of  Ireland. 


The  Prospectus  of  the  Bank,  January  1,  1849  :  — 

LONDON  AND  WESTMINSTER  BANK. 

Established  10th  March,  1834,  — under  the  Act  of  Parliament,  3  $•  4  Will.  IV.  c.  98,— 
and  Registered  under  the  Act  7  $•  8  Viet.  c.  113. 

DIRECTORS.  —  Henry  Bosanquet,  Esq.;  Henry  Buckle,  Esq.;  Frederick  Burmester, 
Esq. ;  John  Garratt  Cattley,  Esq. ;  Thomas  Chapman,  Esq.,  F.  R.  S. ;  James  Denis 
de  Vitre,  Esq. ;  Joseph  Esdaile,  Esq. ;  Thomas  Farncombe,  Esq.,  Aid. ;  Charles 
Gibbes,  Esq. ;  William  Haigh,  Esq. ;  George  Hanson,  Esq. ;  Henry  Harvey,  Esq., 
F. R.  S.;  David  Salomons,  Esq.,  Aid.;  John  Stewart,  Esq.;  Joshua  Walker,  Esq. 

TRUSTEES  AND  REGISTERED  PUBLIC  OFFICERS.  —  Henry  Bosanquet,  Esq.;  Fred- 
erick Burmester,  Esq. ;  Joseph  Esdaile,  Esq. ;  Charles  Gibbes,  Esq. ;  Henry  Harvey, 
Esq. 

GENERAL  MANAGER.  —  James  William  Gilbart,  Esq.,  F.R.  S. 

City  Office.  —  Lothbury  ;  W.  T.  Henderson,  Manager. 

Westminster  Branch. —  1,  St.  James's-square  ;  Oliver  Vile,  Manager. 
Bloomsbury  Branch-  —  214,  High  Holborn  ;  William  Ewings,  Manager. 
Southward  Branch.  —  3,  Wellington-street,  Borough  ;  Edward  Kingsford,  Manager. 
Eastern  Branch.  —  87,  High-street,  Whitechapel ;  W.  D.  Asperne,  Manager. 
St.  Marylebone  Branch.  —  4,  Stratford-place,  Oxford-street ;  George  M.  Mitchell,  Man- 
ager. 

The  capital  of  the  bank  is  £  5,000,000  sterling,  in  50,000  shares  of  £  100  each.  The 
sum  of  £  20  has  been  paid  on  each  share,  so  that  the  paid-up  capital  is  £  1 ,000,000  ster- 
ling. This  presents  the  most  perfect  security  to  the  public,  and  gives  the  bank  the 
most  ample  means  for  affording  to  its  customers  every  reasonable  accommodation. 

The  bank  has  above  eleven  hundred  partners,  whose  names  are  registered  at  the 
Stamp  Office,  and  are  printed  with  the  Annual  Report  of  the  Directors.  The  advan- 
tage obtained  by  a  joint-stock  proprietary  is,  that  those  partners  who  are  customers  to 
the  bank  participate  in  the  profits  made  by  their  own  accounts. 

Current  accounts  are  received  on  the  same  principles  as  those  observed  by  the  Lon- 
don bankers.  Every  person  connected  with  the  establishment  signs  a  declaration  of 
secrecy  as  to  the  accounts  of  individuals.  No  Christmas  boxes  or  other  gratuities  are 
allowed  to  be  taken  by  the  officers  of  the  bank. 

Parties  who  are  desirous  of  having  current  accounts,  without  being  under  the  neces- 
sity of  keeping  a  balance,  are  charged  a  small  commission,  proportionate  to  the  amount 
of  their  transactions.  This  extends  the  advantage  of  a  banking  account  to  parties 
having  moderate  incomes,  or  who  in  the  course  of  their  business  find  ample  employ- 
ment for  their  capital. 

Sums  from  £  10  to  £  1,000  are  received  on  deposit,  at  a  rate  of  interest  to  be  fixed 
at  the  time,  and  they  are  repayable  upon  demand,  without  notice.  For  these  sums  re- 
ceipts are  granted,  called  deposit  receipts.  By  allowing  interest  for  small  sums,  the 
benefit  of  the  deposit  system,  as  practised  in  Scotland,  is  extended  to  all  classes  of  the 
community. 

Sums  of  £  1.000  and  upwards  are  also  received  on  deposit  receipts,  upon  such  terms 
as  may  be  agreed  upon,  with  regard  to  the  rate  of  interest  and  the  time  of  repayment. 
Trustees,  and  others  who  have  money  which  they  cannot  immediately  employ,  may 
thus  obtain  an  interest  for  it  until  an  opportunity  occurs  for  its  permanent  investment. 
Parties  may  lodge  money  upon  an  interest  account  who  have  no  current  account,  and 
those  who  have  current  accounts  may  transfer  any  portion  of  their  balance  to  an  in- 
terest account. 

Circular  notes  and  letters  of  credit  are  issued  for  the  use  of  travellers  and  residents 
on  the  Continent  and  the  United  States.  These  notes  are  payable  at  every  important 
w*  269 


A  Trtatite  on  Banking. 

plaet  ia  Earopt  or  in  the  United  Bute*,  ami  tlitu  enable  a  traveller  to  vary  his  route 
wiiboM  ioconvMieoc*.  No  MpMHC  whatever  i*  incurred,  uu  I  when  cashed"  no  charge 
k  made  tor  coouauaioa.  ThoM  auto*  may  be  obtained  at  the  City-Office  in  Lothbury, 
Of  at  an  r  of  UM  braacao. 

Tlw  bank  take*  ths  ajraacv  of  joint-dock  banks,  private  bankers,  and  other  parties 
rMiJiag  at  *  ill«i»r«  By  the  Act  748  Victoria,  c.  32,  thin  bunk  oU.un.-4  the  right 
of  acrvMiaf  bilk  drawn  at  a  lew  period  than  MX  months  after  date,  and  by  the  Act 
7*8  Victoria,  e.  1 13,  it  acquired  the  privilege  of  suing  and  being  sued  in  the  name 


II.  —  The  London  Joint-Stock  Bank. 

The  Joint-Stock  Bank  was  formal  in  the  year  1836.  That  year  was 
one  of  great  excitement  in  favor  of  the  principle  of  joint-stock  bunking 
both  in  London  ami  in  the  country.  The  shares  of  the  new  bank  •-• 
readily  taken  by  a  very  respectable  proprietary,  most  of  whom  were 
dent  in  Ixuidon.  The  bank  had  also  from  its  commencement  the  ad- 
vantage of  an  influential  commercial  directory.  A  new  feature  in  Lon<l»:i 
b*nk«ng  was  announced.  The  bank  agreed  to  allow  interest  at  2  ]><T 
cent  on  the  minimum  balance  of  a  current  account.  At  the  end  of  <•,•!<•;, 
month  interest  was  allowed  on  the  lowest  balance  that  had  appeared  to  tin; 
party's  credit  at  the  close  of  any  day  during  the  month.  Previous  to  the 
:  ut  of  business,  the  Kink  riiLMi_"-d  as  m.-m.-i^'T  Mr.  George 
Pollard,  who  had  for  many  years  been  the  chief  clerk  in  the  private  bunk 
of  Messrs.  Williams,  Deacon,  &  Co. 

The  capital  of  the  bank  was  fixed  at  =£3,000,000,  divided  into  60,000 
share*  of  .£50  each. 

The  bank  was  opened  on  the  21st  of  November,  1836,  at  temporary 
offices  in  Coleman-street  The  shares  subscribed  for,  and  upon  wliidi 
the  deposit  of  £'Z  per  share  had  been  paid,  then  exceeded  £  30,000. 
Soon  afterwards  the  bunk  removed  to  their  present  premises  in  Prince's- 

:•>•.-' 

The  first  annual  meeting  of  the  proprietors  was  held  on  the  13th  of  De- 
cember, 1837,  at  the  bank  premises  in  Princes-street.  The  number  of 
•hares  on  which  the  <£2  deposit  and  the  first  call  of  <£5  per  share  had 
been  paid  was  then  31,080,  making  a  paid-up  capital  of  £^\~.~>\M. 
Upon  this  capital  a  dividend  was  declared  at  the  rate  of  4  per  cent,  and 
:£  2,932  0*.  9d.  carried  to  the  credit  of"  the  Guarantee  Fund." 

In  the  year  1838  the  directors  made  a  call  of  £  3  a  share,  payable  the 
'21ft  of  May,  1838,  which  increased  the  paid-up  capital  to  £  10  a  share. 
And  in  this  year  the  dividend  was  raised  to  5  per  c< -nt. 

At  the  meeting  in  June,  1839,  the  directors  stated  that  the  deed  of  set- 
tlement required  all  the  effects  of  the  bank  to  be  taken  strictly  at  the  mar- 
ket value  of  the  day  on  which  the  accounts  are  made  up.  The  half  year's 
profits  were  consequently  lower,  from  the  exchequer  bills  held  by  the 
bank  being  valued  at  their  then  low  price  in  the  murk'-t. 

It  was  resolved  at  this  meeting  that  the  time  of  balancing  the  books  of 
the  company  be  in  future  the  30th  day  of  June  and  the  31st  day  of  1  >•  - 
ccmber  in  each  year,  instead  of  the  20th  day  of  May  and  the  20th  day  of 
November;  and  that  the  half-yearly  meetings  of  the  company  be  in  fu- 
ture held  in  the  months  of  January  and  July. 

270 


The  London  Joint-Stock  Bank. 

At  the  general  meeting  held  on  the  llth  of  January,  1840,  the  direc- 
tors announced  their  intention  to  issue  12,432  of  the  reserved  shares,  in 
the  proportion  of  two  to  every  five  held  by  each  shareholder.  The  shares 
were  issued  at  £  1  premium,  and  these  premiums  were  added  to  the 
guarantee  fund.  At  the  meeting  on  the  1 1th  of  July,  1840,  the  report 
stated  that  out  of  these  12,432  shares,  12,254  had  been  claimed,  and  the 
remaining  178  had  been  sold  on  account  of  the  bank  at  a  premium  of  £  3 
each.  The  report  further  stated,  that  "the  manager,  Mr.  Pollard,  having 
claimed  for  his  nominees  the  1,000  shares  at  par  to  which  they  were 
entitled  by  his  agreement  when  originally  engaged,  the  same  have  been 
issued  to  them,  which  increases  the  number  of  paid-up  shares  entitled  to 
participate  in  the  present  dividend  to  32,080." 

In  the  latter  end  of  the  year  1840,  Messrs.  Wright  &  Co.,  a  very  old 
banking-house,  having  many  connections  among  the  Roman  Catholics, 
stopped  payment.  The  London  Joint-Stock  Bank  determined  to  open  a 
branch  at  the  West-end  of  London,  and  appointed  two  of  Mr.  Wright's 
partners  to  be  their  managers. 

The  directors  made  the  following  announcement  of  this  event  to  the 
shareholders  at  the  meeting  held  the  13th  of  January,  1841  :  — 

"  Circumstances  having  occurred  which  appeared  to  present  a  favora- 
ble opportunity  to  establish  another  joint-stock  bank  in  the  western  part 
of  the  metropolis,  the  directors  resolved  to  open  a  branch  of  this  bank  in 
the  premises  recently  occupied  by  Messrs.  Wright  &  Co.,  No.  6,  Henri- 
etta-street, Covent-garden. 

"  Business  was  commenced  at  the  branch  in  question,  which  is  called 
'  The  Western  Branch  of  the  London  Joint-Stock  Bank,'  on  Saturday  the 
5th  ultimo,  and  the  directors  have  every  reason  to  expect  that  it  will  ma- 
terially contribute  to  the  prosperity  of  this  establishment." 

At  the  same  meeting  the  directors  announced  their  intention  to  issue 
the  remainder  of  their  shares  :  — 

"  On  reference  to  the  statement  of  assets  and  liabilities,  the  proprietors 
will  perceive  that  the  number  of  shares  has  been  increased,  by  the  issue 
of  reserved  shares  during  the  past  year,  to  44,512  ;  and  the  directors  are 
of  opinion  that  the  time  has  now  arrived  when  it  is  expedient  to  complete 
the  number  originally  contemplated,  by  the  issue  of  the  remainder,  which 
they  have  accordingly  resolved  to  do. 

"  As  the  directors  have  learned,  with  much  satisfaction,  that  the  princi- 
ple adopted  on  the  former  occasion  was  very  generally  approved  of,  they 
have  decided,  in  the  present  instance,  to  follow  the  same  plan,  as  nearly 
as  possible,  by  issuing  at  a  premium  of  £  1  each,  one  for  every  three 
shares  held  by  the  present  proprietors,  and  by  dividing  the  payment  for 
the  shares  into  four  instalments  of  ^2  10s.  each,  payable  on  the  15th  of 
April,  31st  of  May,  29th  of  July,  and  15th  of  September  next.  The  pre- 
mium to  be  received  on  the  said  shares  will  again  be  carried  to  the  credit 
of  the  guarantee  fund. 

"  There  will  then  remain  to  complete  the  number  of  60,000  shares  the 
small  excess  of  651,  which  will  be  disposed  of  by  the  directors  to  the  best 
advantage  for  the  benefit  of  the  bank." 

At  the  meeting  in  July  the  directors  stated  that,  having  been  unable  to 

271 


A  Treatise  on  Banking. 

afree  with  the  aseigneea  of  Messrs.  Wright  &  Co.  upon  terms  for  the 
purchase  of  the  premise*  in  Henncttn-strret,  and  the  opportunity  ollcring 
•btaining  the  premises  that  had  recently  been  occupied  by  Messrs. 
llammcwley  <&e  Co.  (who  had  also  failed)  in  Pall  Mall,  the  directors  de- 
termined upon  removing  the  business  of  their  Western  Branch  to  the  lat- 
ter house.  The  house  in  Henrietta-street  was  taken  by  the  Cununercial 
Bank  of  London,  who  then  ojK-ned  a  Western  Branch. 

At  tin-  general  meeting  held  on  the  12th  of  January,  IMv!,  the  direc- 
tors announced,  that  the  instalments  on  the  last  issue  of  shares  having 
been  received,  tin*  [>ai<l-up  capital  was  ;£  589,700,  and  as  they  considered 
it  desirable  to  complete  the  issue  of  the  whole  60,000  shares,  they  in- 
tended to  dispose  of  the  remaining  1,030  to  the  public.  Tl « •».-  sham 
were  afterwards  told  at  a  premium  of  .£3,025  \"Zs.  6</.,  winch  amount 
was  added  to  the  guarantee  fund. 

At  this  meeting  the  dividend  was  raised  to  6  per  cent.,  at  which  rate  it 
has  since  remained. 

At  the  July  meeting  in  1843,  the  directors  announced  that,  in  conse- 
quence of  the  abundance  of  money  and  the  low  rate  of  interest,  the  profits 
were  only  £  12,183  17*.  5d.,  and  they  had  recourse  to  the  guarantee  fund 
for  a  sum  equal  to  pay  the  usual  half-yearly  dividend,  at  the  rate  of  6  per 
cent,  per  annum,  —  :£5,817  '2s.  7d. 

In  January,  1844,  the  directors  took  £  1,529  3s.  4<J.  from  the  guaran- 
tee fund,  to  make  up  the  amount  of  the  usual  dividend. 

At  the  meeting  held  in  July,  1844,  the  directors  announced  a  change 
in  their  allowance  of  interest  on  current  accounts.  They  had  come  to  a 
resolution  in  February  last,  "  that  on  and  after  the  1st  of  March,  the  in- 
terest allowed  by  the  bank  to  customers  on  their  minimum  balance  be  one 
per  cent.,  except  on  accounts  the  monthly  minimum  balance  of  which 
on  the  average  of  the  half-year  shall  be  under  two  hundred  pounds." 
£  l,l»f>9  12*.  IQd.  was  taken  from  the  reserved  fund  to  make  up  the  bait- 
yearly  dividend. 

In  January,  1847,  the  directors  announced  the  following  plan  for  the 
future  regulation  of  the  guarantee  fund  :  — 

14  In  meeting  the  shareholders  at  the  usual  period,  the  directors  have 
satisfaction  in  laying  before  them  accounts  which  show  that  during  the 
last  six  months  the  bank  has  realized  a  net  profit  of  ,£31,f>sO  17v. 

"  The  question  how  this  profit  ought  to  be  appropriated  has  necessarily 
brought  under  the  serious  consideration  of  the  directors  the  present  state 
of  the  guarantee  fund,  and  the  amount  to  which  it  should  attain  in  order 
to  carry  out  fairly  the  design  for  which  it  was  instituted.  And  the  result 
of  their  deliberations  has  been  a  resolution  that  it  will  not  be  expedient 
that  it  should  at  present  exceed  £  120,000  except  by  the  accumulation  of 
its  own  interest,  and  such  sums  as  may  be  too  small  to  apply  to  a  bonus. 
But  that  at  the  end  of  each  year,  in  addition  to  the  dividend  of  6  per  cent 
the  surplus  profit  should  be  divided  among  the  shareholders,  provided 
such  surplus  amount  to  2*.  per  share  in  the  capital  of  the  company,  other- 
wise that  it  should  be  added  to  the  guarantee  fund. 

••  In  accordance  with  this  decision,  the  board  will  have  on  this  occasion 
the  pleasure  of  paying  to  die  shareholders  a  bonus  of  2a.  per  share,  in  ad- 


The  London  Joint- Stock  Bank. 


dition  to  the  usual  dividend,  and  the  guarantee  fund  will  then  amount  to 
.£120,117  14s.  3d." 

In  January,  1848,  the  directors  declared  a  bonus  of  7s.  6d.  a  share,  in 
addition  to  the  usual  dividend  of  6  per  cent.  ;  after  sustaining  a  loss  of 
£  6,000  by  the  defalcation  of  one  of  their  clerks  on  the  establishment  of 
the  Western  Branch. 

In  January,  1849,  the  directors  declared  a  bonus  of  7s.  a  share,  in  ad- 
dition to  the  usual  dividend  of  6  per  cent. 

A  Statement  of  the  Paid-up  Capital,  Profits,  Dividend,  and  Surplus  Fund,  of  the  LONDON 
JOINT-STOCK  BANK,  on  the  3lst  December  in  each  Year. 


Date. 


Paid-up  Capital. 

Profits  of  the  Year. 

Amount  of  Dividend. 

£ 

£ 

». 

d. 

£ 

». 

d. 

217,560 

11,634 

» 

9 

8,702 

8 

0 

310,800 

21,243 

12 

6 

13,209 

0 

0 

310,800 

27,068 

6 

10 

17,285 

11 

3 

445,120 

47,922 

8 

10* 

19,148 

0 

0 

589,700 

61,027 

5 

4t 

28,819 

0 

0 

600,000 

48,671 

19 

* 

36,000 

0 

0 

600,000 

31,420 

16 

6 

36,000 

0 

0 

600,000 

37,041 

14 

4 

36,000 

0 

0 

600,000 

41,440 

14 

6 

36,000 

0 

0 

600,000 

65,820 

11 

9 

36,000 

0 

°* 

.  " 

6,000 

0 

o5 

600,000 

62,131 

7 

4 

36,000 

0 

01 

22,500 

0 

05 

600,000 

62,005 

18 

111 

36,000 

0 

°! 

...       , 

21,000 

0 

o5 

Totals,        600,000 


517,428  19     9 


388,663  19     3 


Surplus  Fund. 

£  s.  d. 

2,932  0  9 

10,966  13  4 

20,749  8  10 

49,523  12  8 

81,731  18  0 

94.403  17  2 

89,824  13  8 

90,856  8  0 

96,297  2  6 

120,117  14  3 

123,759  1  7 

128,765  0  6 

128,765  0  6 


*This  sum  includes  £  12,778    8s.  9d.  received  from  premiums  on  shares  sold. 
"  £  14,466    Os.  Od.  ditto  ditto. 

£  3,025  12s.  6d.  ditto  ditto. 

S  These  annual  amounts  of  profits  include  the  sums  applied  as  interest  of  the  surplus  fund. 

Prospectus  for  1849  :  — 

THE  LONDON  JOINT-STOCK  BANK. 
Head  Office.  —  PRINCES-STREET,  MANSION  HOUSE. 

Western  Branch.  —  69,  PALL  MALL. 
Capital,  £  3,000,000  in  60,000  Shares  of  £  50  each. 
The  business  of  the  bank  is  conducted  on  the  following  principles  :  — 

Accounts  of  parties,  properly  introduced,  are  received  agreeably  to  the  present  cus- 
tom of  London  bankers,  with  tliis  advantage,  that  interest  is  allowed  on  current  ac- 
counts kept  at  the  Head  Office. 

Interest  at  the  rate  of  £  1  per  cent,  per  annum  will  be  allowed  on  the  smallest  bal- 
ance which  may  appear  to  the  credit  of  each  account,  kept  at  the  Head  Office,  at  the 
close  of  any  day  during  the  preceding  month :  provided  the  monthly  minimum  balance, 
on  the  average  of  the  half-year,  shall  not  be  under  £  200. 

Sums  of  money  received  on  deposit,  at  such  rate  of  interest,  and  for  such  periods,  as 
may  be  agreed  upon,  reference  being  had  to  the  state  of  the  money  market ;  and,  if 
required,  bills  or  promissory  notes,  at  not  less  than  six  months'  date,  will  be  deliv- 
ered to  depositors,  in  lieu  of  receipts,  for  sums  of  not  less  than  £  100. 

The  agency  of  joint-stock,  and  other  country  and  foreign  banks,  undertaken  on  such 
terms  as  may  be  agreed  upon. 

Investments  in,  and  sales  of,  all  descriptions  of  British  and  foreign  securities,  bul- 

273 


A  Trtatbt  on  Banking. 

dividend*  recdred,  and  every  other  description  of  bank. 
SM  bviisMS  nffA  mosjsy  SMACJ  transacted. 

Tlie  boanl  of  ilirvcton  mints  weekljr,  when  a  full  statement  of  the  affairs  of  the 
aak  U  lakl  before  • 

Circular  Ix-ttrr«  of  Credit  granted  on  the  Continent,  and  on  the  ehicf  commercial 
I  Of  the  world. 


III.  —  The  Union  Bank  of  London. 

The  Union  Bank  of  London  was  formed  chiefly  by  ^<  nil. m.  n  who 
were,  by  birth  or  otherwise,  connected  with  Scotland.  The  capital  was 
fixed  at  £  3,000,000  in  60,000  shares  of  £  50  each. 

The  bank  adopted  the  principle  of  allowing  "2  per  cent,  interest  on  the 
minimum  balance  of  a  current  account :  —  "  Panics  keeping  current  or 
drawing  fftffHllrt*  will  be  credited  on  the  first  day  of  every  month,  on  the 
smallest  balance  at  the  credit  of  their  account  at  the  close  of  business  on 
any  day  during  the  post  month,  provided  that  such  balance  shall  not  be 
less  than  £  100.  The  total  amount  of  interest  will  be  passed  to  account 
every  six  months.11 

The  bank  was  opened  on  the  4th  of  February,  1839,  at  No.  8,  Moor- 
gate-street ;  and  a  branch  was  opened  on  the  25th  of  March  following, 
at  temporary  offices  in  Argyle-street,  Regent-street,  until  a  bank-house 
should  be  erected  on  the  freehold  ground  which  the  directors  had  pur- 
chased for  that  purpose. 

Previous  to  the  opening  of  the  bank  the  directors  engaged,  as  general 
manager,  Mr.  William  Wilson  Scrimgeour,  one  of  the  principal  officers 
in  the  discount  department  of  the  Bank  of  England. 

The  first  meeting  of  shareholders  was  held  on  the  8th  of  July,  1840. 
The  report  stated  that  on  the  30th  June  the  paid-up  capital  was  £  210,025, 
being  £  5  per  share  paid  on  42,005  shares,  held  by  738  proprietors.  A 
dividend  was  declared  at  the  rate  of  5  per  cent. ;  and,  after  liquidating 
a  portion  of  the  preliminary  expenses,  ^2,000  was  set  apart  as  the 
foundation  of  a  surplus  or  guarantee  fund. 

In  the  Second  Annual  Report,  made  to  the  general  meeting  of  pro- 
prietors the  12th  of  July,  1841,  the  directors  stated  they  had  made  an 
additional  call  of  £S>  per  share,  which  had  been  most  promptly  re- 
funded to  by  the  proprietors ;  and  the  paid-up  capital  then  amounted  to 
£  422,700. 

The  report  also  stated  that,  a  favorable  opportunity  having  offered  itself 
for  opening  a  branch  at  Charing-cross,  the  directors  availed  themselves  of 
it,  by  purchasing  the  premises  No.  4,  Pall  Mall  East,  lately  occupied  by 
the  Metropolitan  Bank,  which  had  withdrawn  from  business.  Mr.  Wight, 
the -manager  of  the  Metropolitan  Bank,  was  appointed  the  manager  of 
the  branch, 

At  the  general  meeting  held  in  July,  1844,  the  directors  stated  that, 
**the  premises  now  occupied  by  the  bank  having  become  in.-nli-ijua'' 
the  convenient  transaction  of  its  extended   business,  the   directors   had 
availed  themselves  of  the  opportunity  of  purchasing   from   the   Grea* 
Western  Railway  Company,  their  extensive  freehold  premises  in  Princes 

271 


The  Union  Bank  of  London. 


street,  which  will  secure  a  permanent  position  for  the  bank  in  the  most 
convenient  situation  in  the  city." 

The  directors  state  in  their  report  of  July  1847  :  — 

"  The  directors  consider  they  are  justified  in  increasing  the  rate  of 
dividend,  and  they  have  therefore  declared  a  dividend  for  the  last  six 
months  of  3|  per  cent.,  which,  with  2|  per  cent,  paid  in  January,  will 
make  the  dividend  6  per  cent,  clear  of  income-tax,  for  the  whole  year." 

The  report  also  states  :  — 

"  The  directors  have  considered  the  subject  of  the  appropriation  of  the 
reserved  shares,  and  have  resolved  that  they  shall  be  offered  in  the  first 
instance  to  the  shareholders  only,  in  ratable  proportion  to  the  shares 
held  by  them,  and  on  such  terms  as  shall  be  equivalent  to  a  liberal  bonus. 
And  the  proprietors  may  rely  on  the  directors  giving  ample  notice  of,  and 
selecting  such  period  for,  this  appropriation  as  shall  be  most  desirable  for 
the  interests  of  the  bank,  and  advantageous  to  the  proprietors  individ- 
ually." 

In  the  report  of  July,  1848,  the  directors  again  refer  to  this  subject :  — 

"  With  respect  to  these  shares,  which  were  alluded  to  in  the  last  an- 
nual report,  it  is  almost  superfluous  to  refer  to  the  unprecedented  mer- 
cantile crisis  which  has  marked  the  eventful  period  since  the  last  general 
meeting,  as  having  rendered  it  inexpedient  to  appropriate  them  at  a  time 
when  it  might  be  inconvenient  to  many  proprietors  to  avail  themselves 
even  of  so  advantageous  an  investment." 


Table  of  the  Paid-up  Capital,  Annual 

Profits,  Dividends,  and  Amount  of  Surplus  Fund, 

of  the  UNION  BANK  OF 

LONDON, 

during  each  Year  ending  the  30th  of  June. 

Date. 

Paid-up  Capital. 

Profits  of  the  Year. 

Amount  of  Dividend. 

Surplus  Fund. 

£. 

£. 

t. 

d. 

£. 

•  t. 

d. 

£. 

«. 

d. 

1840 

210,025 

12.501 

5 

0 

10,501 

5 

0 

2.000 

0 

0 

1841 

422,700 

17,851 

s 

0 

15,851 

5 

0 

4.000 

0 

0 

1842 

422,900 

23,145 

0. 

0 

21,145 

0 

0 

6,000 

0 

0 

1843 

422,900 

23,145 

0 

0 

21,145 

0 

0 

8.000 

0 

0 

1844 

422,900 

24,613 

16 

1 

21,145 

0 

0 

11,468 

It) 

1 

1845 

422,900 

28,630 

12 

2 

21,145 

0 

0 

18,954 

8 

3 

1846 

422,900 

23,145 

Q 

0 

21,145 

0 

0 

20,954 

8 

3 

1847 

422,900 

42,070 

5 

5 

25,374 

0 

0 

37,650 

1.3 

8 

1848 

422,900 

34,474 

0 

0 

25,374 

0 

0 

46,750 

13 

8 

3     8 


182,825  10    0 


46,750  13     8 


Totals,  422,900  229,576 

Present  Prospectus :  — 

UNION  BANK  OF  LONDON. 
Capital  £  3,000,000,  in  Shares  of  £50  each. 

DIRECTORS. —  Sir  Peter  Laurie,  Alderman,  Governor;  William  Mountford  Nurse, 
Esq.,  Deputy  Governor;  George  Webster,  Esq. ;  John  Barnes,  Esq. ;  J.  W.  Sutherland, 
Esq. ;  James  Farquhar,  Esq. ;  Peter  Laurie,  Esq. ;  John  Council,  Esq. ;  Charles  Lyall, 
Esq. ;  John  Chapman,  Esq. ;  Henry  Hulbert,  Esq. ;  Archibald  Boyd,  Esq. ;  Lieut. 
Col.  Matheson,  M.  P. ;  John  Scott,  Esq. 

Principal  Office.  —  2,  Princes-street,  Mansion-house. 

William  Wilson  Scrimgeour,  General  Manager. 

Regent-street  Branch  Office.  —  Argyll-place ;  Henry  T.  Clack,  Manager- 
Charing  Cross  Branch  Office. — 4,  Pall-mall,  East;  Alexander  Wight,  Manager. 
Secretary.  — Walter  Laurie. 
275 


A  Treat  iff  on  Banking. 

TW  capital  of  tlM  bank  in  £  3,000,000  sterling,  in  60,000  shares  of  £  50  each  ;  42,290 
•f  dWM  shares  (CM  each  of  which  £10  bus  been  paid,  making  the  paid-up  capital 
JC  4M.900)  are  held  by  nearly  600  proprietors,  whoM  names  are 


TEMMS. 

Osrmrf  Xnvmts.  —  Parties  keeping  current  or  drawinjj  accounts  will  he  credited  on 
the  dm  dar  of  every  month  with  a  month's  interest,  at  the  rate  of  2  JKT  rent  per 
annam.  on  the  smallest  balanrc  at  the  cn-.lit  ol  unt  at  tin-  .!,.„•  »f  UiMness 

on  any  da?  during  the  past  month,  provided  that  such  balance  ahull  not  bo  lc,is  than 
£  100.  Toe  total  amount  of  inn-rot  will  be  passed  to  account  cvci  -y  six  months. 

Drpotit  Aetwutt*.  —  The  rate  of  interest  at  present  allowed  on  money  placed  on  de- 
rail at  tea  daya*  notice,  fa  JC  S  per  cenu,  but  which  will  rise  or  fall,  pro  nitil,  with  the 
Beak  of  Kagtand  rate  of  discount  for  first-class  bills,  being  always  one  per  cent,  under 
that  rale.  The  maximum  not  to  exceed  5  per  cent,  Receipts  for  the  sums  so  de- 
posited will  be  granted  to  the  parties;  or,  for  the  convenience  <•!'  il<-|«>Mtors  going 
•broad,  bills  or  promissory  notes,  at  not  less  than  six  months'  date,  including  interest 
till  maturity,  will  be  issued. 

GENERAL  BUSINESS. 

The  agency  of  country  and  foreign  banks,  whether  joint-stock  or  private. 

Circular  notes  and  letters  of  credit  issued  for  all  parts  of  the  continent  of  Europe 
••4  elsewhere. 

Parchascs  and  sales  effected  in  all  the  British  and  foreign  stocks  and  securities,  and 
the  dividends  received  without  charge. 

The  half-pay,  Ac,  of  officers,  being  customers,  also  received  without  charge. 

W.  W.  SCRIMOBOUR,  General  Manager 


IV.  —  The  Commercial  Bank  of  London. 

This  bank  commenced  at  No.  3  Moorgate  Street,  Lothbury.  Its  sbares 
were  £  1,000  each.  The  first  manager  was  Mr.  Sparkes,  who  had  been 
a  private  banker  at  Exeter.  The  present  manager,  Mr.  Alfred  R.  Cutbill, 
was  cub-manager  of  the  London  and  County  Bank. 

A  SMfwuml  of  the  Paid-up  Capital,  Profits,  Dividend,  and  Surplus  Fund,  of  the  COM- 
MERCIAL BANK  OP  LONDON,  on  the  31  st  of  December  in  each  Year. 

Data.                       Paid-up  Capital.  Profits  of  the  Year.  Amount  of  Dividend.  Surplus  Fund. 

£  £       s.   d.              £     s.    d.  £       t.    d. 

1841,    .        •    .    .    80,000  3,619  19     5             2,684  14     3  935     5     2 

184*,         .        .        80,000  4,584     4     3            4,000     0     0  1,519     9     5 

1843,  .        .        .    80,000  3,249    0    0            3,200    0    0  1,563     9     5 

1844,  .        .        80,000  4,945  12     2  4,000    0    0  2,514     1     7 

1845,  .        .        .  100,000  6,981   16     8  4,987     6     9  4.508  11     6 

1846,  .        .      122360  1 -'••,» «)  16     8  7,042     8     6  10,066  19     8 

1847,  .        .        .  188,280  12,382  13     2  .'472  14.825     5     8 

1848,  .        .       128380  10,257  19     4  7,696  16     0  17,386     9     0 


Totals,  .        .  128,280  58,622     1     8          41,235  12    8  17,386     9    0 

The  ft" ret  annual  meeting  was  held  on  the  30th  of  June,  1841,  when 
the  paid-up  capital  amounted  to  £  80,000,  on  which  a  dividend  was  paid 
•t  the  rate  of  4  per  cent  per  annum.  The  bank  had  opened  a  Western 
Branch  in  Henrietta  Street,  Covent  Garden,  in  the  premises  formerly  oc- 
cupied by  the  private  bank  of  Messrs.  Wright  &  Co.,  who  had  become 
bankrupt*. 

276 


The  London  and  County  Bank. 

At  the  annual  meeting  in  1842  the  dividend  was  raised  to  5  per  cent. 

In  the  year  1843  the  dividend  declared  was  4  per  cent.,  and  in  1844  it 
was  5  per  cent. 

At  a  special  meeting,  held  on  the  3d  of  June,  1844,  it  was  resolved  to 
reduce  the  shares  from  £  1,000  to  £  100  each. 

In  July,  1845,  the  directors  met  their  proprietors  for  the  first  time  in 
their  new  house,  in  Lothbury.  The  rate  of  interest  was  advanced  to  six 
per  cent. 

Present  Prospectus :  — 

COMMERCIAL  BANK  OF  LONDON, 

LOTHBURY,  AND  6,  HENRIETTA  STREET,  COVENT  GARDEN. 

Capital,  £2,000,000,  in  20,000  Shares,  of  £100  each. 

DIRECTORS. — John  Taylor,  Esq.,  Chairman.  Thomas  Barnewall,  Esq.,  Deputy 
Chairman.  Charles  Dickson  Archibald,  Esq. ;  William  Beresford,  Esq.,  M.  P. ;  William 
SprottBoyd,  Esq.;  John  Alfred  Chowne,  Esq. ;  William  Cooper,  Esq. ;  James  Alex- 
ander Douglas,  Esq. ;  Charles  Hill,  Esq . ;  Jonathan  Hopkinson,  Esq.;  Edward  Ox- 
enford,  Esq. ;  John  Savage,  Esq. ;  Joseph  Thompson,  Esq. ;  Joseph  Underwood,  Esq. ; 
Richard  Walker,  Esq.,  M.  P. ;  Thomas  Winkworth,  Esq. 

MANAGER.  —  Mr.  Alfred  R.  Cutbill. 
SOLICITORS.  —  Messrs.  Amory,  Nelson,  Travers,  &  Wynn,  and  Messrs.  Norris  &  Sons. 

Accounts  of  parties  received  and  kept  on  the  plan  generally  adopted  by  London 
bankers. 

Parties  having  current  accounts  with  this  bank  have  the  advantage  of  transferring 
any  surplus  balance  to  a  deposit  account  bearing  interest;  and  sums  of  money  are  re- 
ceived on  deposit  from  parties  not  keeping  current  accounts,  at  such  rate  of  interest, 
and  for  such  periods,  as  may  be  agreed  upon. 

The  agency  for  country  and  foreign  banks  undertaken  on  such  terms  as  may  be 
agreed  upon. 

Purchases  and  sales  of  British  and  foreign  securities,  &c.,  effected,  dividends  re- 
ceived, and  every  description  of  banking  business  transacted. 


V.  —  The  London  and  County  Bank. 

This  bank  was  originally  called  the  Surrey,  Kent,  and  Sussex  Bank, 
and  it  was  intended  that  its  head  office  should  be  fixed  in  Southwark.  It 
afterwards  assumed  the  above  title,  and  took  the  premises  formerly  occu- 
pied by  the  private  bank  of  Messrs.  Lees,  Brassey,  &  Co.,  at  No.  71 
Lombard  Street.  From  thence  it  removed  to  No.  21  Lombard  Street, 
the  premises  formerly  occupied  by  the  private  bank  of  Messrs.  Esdaile  & 
Co.  It  has  forty-five  branches,  all  in  the  country. 

The  following  Private  Banks  have  been  absorbed  in  the  London  and 
County  Bank :  — 


1.  Aylesbnry, 
2.  Chatham, 
3.  Cranbrook, 
4.  Oxford, 

J.  &  T.  Chapman. 
Jeffreys  &  Hill. 
Wilmhurst  &  Co. 
Davenport  &  Co. 
x                         2' 

5.  Petcrsfield, 
•    6.  Sandwich, 
7.  Petworth, 

77 

Hector  &  Co. 
Emmerson  &  Co. 
John  Stoveld. 

A  Treatite  on  Banking. 

11»e  branches  at  Abingdon,  Arundel,  Cambridge,  Canterbury,  Chi«-h« ••<• 
icr,  Romford,  St.  Albnn'*,  nml  Stoncy  Stratford,  w< 
sequence  of  the  failure  of  private  bonks  in  those  places. 

Present  Prospectus :  — 

THE  LONDON  AND  COUNTY  JOINT-STOCK  BANKING  COMPANY 
Subscribed  Capital  £500,000,  in  Shares  of  £  50  each ;  £  20  paid. 

Panut  Ettablukmtmt,  21  Lombard  Street. 
DiRKcroas.  — John  Sadleir,  Esq.,  M.  P.,  Chairman.     John  Griffith  Frith,  Esq., 


William  Cory,  Esq.;  Juntos  William  Deacon,  Esq. ;  J.  A.  Durham, 
Esq.  ;* Swynfen  Jerri*,  Esq. ;  John  Cuthbert  Jorncr,  Esq.;  J.  H.  Lance,  Esq  ;  Kirhard 
Spriagett,  Esq. ;  Clement  Tabor,  Esq. ;  John  Wheelton,  Esq. ;  James  Rhodes,  Esq., 
HtftriiHf  Dinctor. 

Tausraas,  —  Wm.  Cory,  Esq. ;  James  William  Deacon,  Esq. ;  Swynfen  Jerris,  Esq. 
GaxKRAL  MANAGER.  —  Henry  Luard,  Esq. 

STAXDIMO  COCWSEL.  —  Sir  John  Jerris,  M.  P.,  Attorney  General;  Russell  Gurncy, 

Esq^Q.C. 

SKCRKTABT.— R.  P.  Nichols,  Esq. 
SOLICITORS.  —  Messrs.  Wilkinson  &  Gurncy. 

Branch  Banks  of  the  Company. 

Abingdon  and  Wantage, 
Arnndrl  and  Worthing, 
A.hfora, 

Ayleahary  and  Thane, 
Baabary, 

Buhop's  Stortford  and  Saf- 
fron Waldeii, 
Rraintree, 
Brighton, 
Buckingham, 
Cambridge, 
Canterbury, 
Chanani, 
Chelmiford, 
Chirhester, 


Croydon, 

Maldon, 

Dorking, 

Oxford  and  Witney, 

Dorer, 

Petersneld, 

Graresend 

Pclworth  and  Midhurst, 

Greenwich, 

Koiiifonl  and  Chipping 

Halstead, 

Ongar, 

Hastings  and  Battle, 

Rye, 

Hertf«)r<l, 

Sandwich, 

Horsham, 

Seren  Oaks, 

Huntingdon,  St.  Ire's,  and 

St.  Alban's, 

St.  Neot's, 

Stoney  Stratford, 

Leighton  Buzzard, 

Tenterden, 

Lewes,  Hailsham,  and  New- 

Tnnbridge, 

haven, 

Tnnbridge  Wells, 

Luton,  Dunstablc,  and 

Woolwiih, 

Hitchin, 

Wrotham. 

Maidstone, 

Cranbrook, 

"  I  look  upon  the  principle  of  joint-stock  companies  as  one  of  the  great  discorerics 
of  modern  times.  I  regard  them,  when  made  responsible  to  public  opinion,  as  the 
•MOMi  on  which  all  successful  enterprise  must  be  founded.  I  say  further,  that  if  there 
be  any  one  description  of  business  to  which  the  principle  of  a  joint-stock  company  can 
be  more  applicable  than  another,  it  is,  under  due  restrictions,  the  business  of  banking."  * 

The  history  of  joint-stock  banks  is  short,  —  they  sprang  from  necessity.  The  panic 
of  1825  provoked  an  inquiry  into  the  banking  system,  and  the  result  was  the  en- 
actment of  the  7th  Geo.  Ivn  the  statute  to  which  they  owe  their  origin  in  this 
awMTF. 

Thnr  saccess  has  been  extraordinary.  Established  in  Scotland,  Ireland,  and  Eng- 
land, their  shares  command  hijrh  premiums,  in  many  cases  exceeding  100  per  mit  <<n 
the  paid-up  capital  Their  stability  and  prosperity  'in  Scotland,  from  the  date  of  their 
eriajaal  foundation  up  to  the  present  hour,  are  notorious :  it  is  beyond  a  question,  that 
BO  prisjdpla  of  banking  which  has  yet  been  subjected  to  the  test  of  experience  has  af- 
forded aa  equal  extent  of  credit  with  equal  security. 

They  have  been  tendered  by  the  Legislature  as  a  safe  medium  of  commercial  trans- 

*  Extract  from  the  Speech  of  the  Chancellor  of  the  Exchequer,  1835 
178 


The  London  and  County  Bank. 

actions;  they  have  been  accepted  by  the  leading  capitalists;  and  they  have  received 
the  stamp  of  approbation  and  implicit  confidence  from  the  great  mass  of  the  population 
of  the  three  kingdoms. 

The  primary  advantage  of  joint-stock  banks  is  their  undoubted  stability.  They 
offer  to  individuals  the  opportunity  of  becoming  their  own  bankers.  As  shareholders, 
they  participate  in  the  profits  of  their  own  accounts.  If  they  require  accommodation, 
a  part  of  the  consideration  they  pay  for  it  returns  to  them ;  if  they  deposit,  the  amount 
is  doubly  fruitful :  first,  they  receive  from  the  bank,  interest  on  the  sum  deposited ;  and 
secondly,  they  share  in  the  profit  which  the  bank  itself  makes  by  the  use  of  their  in- 
vestment. In  a  word,  private  individuals,  instead  of  giving  the  profit  of  their  accounts 
to  private  bankers,  by  becoming  shareholders  in  joint-stock  banks  divide  it  amongst 
themselves. 

As  a  short  summary,  it  may  be  said,  that  joint-stock  banks  owe  the  public  approba- 
tion bestowed  on  them,  and  the  public  confidence  they  enjoy,  to  the  number  and 
wealth  of  their  proprietors,  to  the  publicity  of  their  transactions,  to  their  actually  sub- 
scribed capital,  to  the  security  which  they  offer  for  the  fulfilment  of  their  engagements, 
to  the  almost  unlimited  credit  of  a  large  and  rich  proprietary,  to  the  power  thence  de- 
rived to  afford  to  the  public  the  greatest  accommodation  consistent  with  prudence,  to 
the  individual  influence  of  each  member  of  the  company,  whose  exertions  secure  to  it 
considerable  business  at  the  outset,  and  to  their  perfect  freedom  from  a  dread  of  the 
sudden  and  ruinous  checks  to  which  private  banks,  however-  solvent  and  honorable  the 
partners,  are  liable  in  those  panics  which  seem  to  occur  periodically  in  great  trading 
communities.  These  advantages  are  found  to  be  obtainable  from  banking  companies 
founded  on  the  joint-stock  principle,  and  from  them  alone. 

The  London  and  County  Bank  was  established  with  the  avowed  object  of  introduc- 
ing these  advantages  amongst  the  inhabitants  of  the  surrounding  districts  of  London, 
within  sixty-five  miles;  and  whatever  the  difficulties  of  prejudice  and  opposition  which 
the  directors  had  to  encounter  in  the  first  instance,  such  has  been  the  growing  favor  of 
the  joint-stock  system  of  banking,  engendered  by  the  inquiring  spirit  of  the  age,  and 
confirmed  by  the  disastrous  results  consequent  upon  the  failure  of  private  banks,  that 
the  London  and  County  Banking  Company  can  now  triumphantly  point  to  upwards 
of  forty  branches  which  have,  one  after  the  othej-,  been  raised  into  existence,  and 
which,  nurtured  by  the  wants  of  their  various  localities,  are  steadily  and  progressively 
increasing  in  profit  and  importance. 

The  London  and  County  Bank  is  protected  from  one  of  the  most  active  causes  of 
loss  to  a  bank,  —  panic ;  by  not  being  a  bank  of  issue,  it  does  not  coin  a  circulation 
of  its  own  ;  it  confines  its  payments  to  that  which  has  ever  merited  public  confidence, 
the  coin  of  the  realm,  and  the  notes  of  the  most  powerful  joint-stock  bank  in  the  world, 
—  the  Bank  of  England. 

The  company  at  the  parent  bank  and  its  branches  open  accounts  with  commercial 
houses  and  private  individuals,  either  upon  the  plan  usually  adopted  by  the  London 
bankers,  or  by  charging  a  small  commission  to  those  persons  to  whom  it  may  be  more 
convenient  to  use  the  whole  of  their  capital. 

They  allow  interest  at  the  rate  of  1  per  cent,  per  annum  on  the  amount  of  the 
monthly  minimum  balance  exceeding  £100,  which  is  passed  to  the  customer's  credit 
at  the  expiration  of  the  quarter. 

They  receive  deposits  at  such  rate  of  interest  and  for  such  periods  as  may  be  agreed 
upon,  reference  being  had  to  the  state  of  the  money  market. 

They  obtain  letters  of  credit  for  all  the  principal  cities  and  towns  of  foreign 
countries. 

They  receive  dividends ;  army,  navy,  and  civil  pay,  and  pensions ;  proceeds  of  ec- 
clesiastical property,  and  rents ;  effect  transfers  and  sales  of  stock  and  shares ;  and 
transact  financial  business  generally. 

The  following  are  the  leading  features  in  the  deed  of  settlement  on  which  the  com- 
pany has  been  constituted :  — 

1.  The  shares  of  the  London  and  County  Bank  are  £50  each,  and  they  are  dis- 
persed amongst  upwards  of  400  proprietors,  mostly  residing  in  the  immediate  localities 
of  its  branches. 

2.  As  regards  the  liability  of  the  shareholder,  the  deed  of  settlement  contains  a 
clause,  which,  while  it  leaves  unimpaired  that  great  principle  of  the  law  on  which  the 
stability  of  joint-stock  banks  is  founded,  and  which  secures  to  them  "unlimited'1 
public  confidence,  namely,  the  "unlimited"  liability  of  each  shareholder  for  the  obli- 

279 


A  Trtatlte  on  Banking. 

at  the  same  time  efficiently  protect-  him.  l.y  providinj;,  that  if 
the  companr  shall  amount  to  one  third  of  the  |mid-iij>  cnpitnl,  a 
•MOttaf  shall  be  railed  to  consider  the  pn>)>n<-ty  of  dissolving  it;  and  that  it.  in  opposi- 
tion lo  the  view»  of  anv  shareholder,  it  !*•  drt. •trnmn.-d.  notwithstanding  the  loss,  to 


he  may  call  on  those  shareholder*  who  so  resolve 
10  purchase  his  ahares,  and  tho*  release  him  from  all  future  res|>on-ihility. 

A  proportion  of  the  profits  is  reserved  «o  form  a  permanent  gnnrantre  fund  ;  and 
,  the  entire  future  profits  will  be  divided  union-  the 


4.  A  balance-shaet,  dearly  showing  the  state  of  the  financial  affairs  of  the  company. 
will  be  open  to  the  hMparrion  of  the  shareholder*  seven  days  previous  to  each  annual 
meettaf. 

§.  MMTtholdcn  are  entitled  to  one  vote  for  five  shares ;  to  two  votes  for  twenty 
shares  ;  to  three  votes  for  fifty  shares ;  and  to  five  votes  for  one  hundred  shares  anil 
•pwanis. 

By  order  of  the  Directors, 

R.  P.  NICHOLS, 
SI,  Lombard  Stntt.  Secretary. 


The  total  number  of  places  at  which  business  is  carried  on  in  London 
by  joint-stock  banks  is  fourteen,  of  which  seven  are  to  the  east,  and  seven 
to  the  west  of  Temple-bar. 

No.  I.  —  Analysis  of  the  Rehtnu  made  to  the  Commissioners  of  Stamps  and  Taxes  by  thi 
Joint-Stock  Banks  of  London,  in  January,  1849. 


London  and  London  i-n-lnn  n.nk  Commercial  London  and 

Wwtmiiutar  Joint  Slock  '},"                  Bank  County  Total. 

BMfc  Bauk.  *U«**.  odjoafa  H.^ 

Panka  raridanl  In  London  and 

wHMa  15  miUa,     .       .       .761  r   ;  373                110  99  1  .' 

Da.  la  other  pan*  of  En«Uod,       361  177  109                 63  263  963 

.       .          44  17  80                   5  146 

.       .       .14  1  1                    1  1  18 

19  9  7                  10  —  45 


1,199  828  670  179  363  3,138 

No.  IL—Abttract  of  the  Affairs  of  the  Joint-Stock  Banks,  from  their  last  Reports. 


Capital             Capital  Amount  of  Reaerved    Amount   Paid-up  Dividend 

Babaertbad.        Paid-up.  Dapmita.  Fund,     of  Shares.  perShr.  par  Cant. 

•ail  TTsstmln           £                  £                 £  £  £  £  £ 

6,000,000  1,000,000       3,089,659  102,723          100  90  6 


.       .       3,000,000          600,000       S,3»,OS6       198,765  50  10       6*3}  Bo. 

Uaka  Bank  of  London,   3,000,000          422,900       2,614,723         46,750*         60  10  6 


.       .     641,400          138,380          406,217         17,386         100  90 

.       .       .         «M»          1»,800        1,364,730         27,650  60  20 

£12,141,400       9^30,9*0       9^23^90       323,174 


•  T*4a  to  tha  anoaut  tran*ferred  from  tha  Proflt  and  Loat  Account,  without  tha  accumulationa. 
WMk  dMsa,  It  aaMBU  to  £10,000,  which  I.  inraatad  in  Bank  Slock. 

Two  joint-rtock  banks  have  been  discontinued  in  London.  1.  "  The 
Metropolitan  Bank,*1  which  was  formed  in  1839,  and  wound  tip  in  1841. 
The  manager,  the  premises,  and  the  customers  were  transferred  to  the 
Union  Bank  of  London,  who  then  opened  a  branch  at  Charing-cross.  2. 


The  Clearing-House. 

"  The  St.  Marylebone  Bank,"  opened  in  1836,  was  wound  up  in  1841. 
The  business  of  the  bank  was  transferred  to  the  St.  Marylebone  Branch 
of  the  London  and  Westminster  Bank. 

THE  CLEARING-HOUSE. 

The  joint-stock  banks  are  not  admitted  into  the  Clearing-house.  This 
exclusion  puts  them  to  some  inconvenience,  and  to  considerable  expense. 
There  are  certain  classes  who  cannot  conveniently  keep  their  account 
with  a  bank  that  does  not  clear.  The  banks  have  to  keep  a  larger 
amount  of  money  in  their  tills,  and  thus  there  is  a  loss  of  interest.  They 
have  to  employ  more  clerks,  to  present  their  bills  and  cheques  at  the 
houses  of  the  clearing  bankers,  and  thus  there  is  a  greater  expenditure  in 
salaries.  In  lending  money  on  the  Stock  Exchange  they  have  to  stipu- 
late for  payment  in  bank  notes,  and  not  by  a  clearing  cheque.  In  selling 
stock  they  have  to  make  the  same  agreement.  In  these  cases  they  have 
sometimes  to  submit  to  less  favorable  terms,  as  it  is  not  always  conve- 
nient, and  never  agreeable,  to  the  stock-brokers  to  supply  bank  notes 
in  the  middle  of  the  day.  Other  inconveniences  are  also  occasionally 
experienced. 

The  exclusion  of  the  joint-stock  banks  inflicts  also  some  inconvenience 
and  loss  on  the  clearing  bankers.  The  joint-stock  banks  present  all  their 
bills  and  cheques  at  the  counters  of  the  respective  clearing  bankers  three 
times  a  day,  and  receive  payment  in  bank  notes.  On  the  other  hand, 
each  clearing  banker  presents  his  bills  and  notes  at  the  same  hours  on  the 
several  joint-stock  banks,  at  their  respective  counters,  and  receives  pay- 
ment in  bank  notes.  To  meet  the  claims  made  upon  them  daily  by  the 
private  banks,  the  joint-stock  banks  have  to  keep  in  their  tills  a  larger 
amount  of  bank  notes  than  they  would  keep  were  they  members  of  the 
Clearing-house.  And,  on  the  other  hand,  each  clearing  banker  has  also 
to  keep  a  larger  amount  of  bank  notes  to  meet  the  claims  made  upon  him 
at  his  counter  by  the  joint-stock  banks.  The  customer  of  the  private 
banker  must  also  make  provision  the  day  before  they  fall  due  for  any 
bills  he  may  have  made  payable  at  his  banker's.  For  should  those  bills 
be  in  the  hands  of  the  joint-stock  bank  who  will  present  them  early  in  the 
morning,  and  if  provision  is  not  previously  made,  the  bills  will  be  dishon- 
ored. Stock-brokers,  too,  have  sometimes  sustained  annoyance  from  this 
cause.  They  have  sold  stock  for  parties  who  keep  their  account  with  a 
joint-stock  bank,  and  when  their  cheque  has  been  presented  for  payment 
by  the  joint-stock  bank,  it  has  not  been  paid.  The  answer  given  has 
been  that  it  must  come  through  the  clearing ;  and  as  the  joint-stock  bank 
could  not  pass  it  through  the  clearing,  it  has  been  returned  dishonored  to 
the  broker's  customer.  These  inconveniences  and  annoyances  to  all  par- 
ites  will  necessarily  multiply  as  the  business  of  the  joint-stock  banks  shall 
increase. 

The  Clearing-house  was  established  about  seventy- five  years  ago,  by 
some  of  the  London  bankers,  for  the  purpose  of  facilitating  their  exchan- 
ges with  each  other.  It  was  at  first  by  no  means  generally  approved,  and 
some  of  the  principal  bankers  refused  to  have  recourse  to  it.  After 
the  number  of  clearing  bankers  had  increased,  a  committee  was  formed 
x*  281 


A  Treatise  on  Banking. 

tor  it»  government  This  committee  is  composed  of  five  or  six  of  the 
leading  banker*,  and  any  new  bank  that  de-sin-  to  havr  tin-  pri\iirj(o  of 
dealing,  mutt  now  apply  for  jwrmission  to  the  committee. 

The  object  the  clearing  bankers  had  in  view  was  to  exchange  bills  and 
cheques  against  bills  and  cheque*,  and  thus  bo  enabled  to  carry  on  tlu-ir 
business  with  a  less  amount  of  capital.  Hut  while  the  bunkers  cnd«-.,\- 
oured  to  promote  their  own  interest,  they  promoted  at  the  same  time  tin- 
interest  of  the  public.  The  sums  liberated  from  employment  in  tliis  way 
became  available  for  employment  in  agriculture,  manufactures,  and  com- 
merce. Whenrv«T  any  banker,  tln-n-torc,  is  excluded  from  the  Clenrin_'- 
houeo.  and  b  consequently  obliged  to  keep  a  larger  amount  of  cash  in  his 
coffer*,  hk  available  capital  is  so  far  reduced,  and  thus  the  agriculture, 
manufactures,  and  commerce  of  the  country  receive  less  encouragement. 

The  establishment  of  the  Clearing-house  has  led  to  new  arrangements 
in  several  branches  of  business.  The  stock-brokers,  for  instance,  now 
settle  all  their  receipts  mod  payments  by  cheques,  to  be  paid  through  the 
flnerlirf  hnnsfi  The  cheques  a  broker  draws  on  his  banker  are  paid  at 
the  Clearing-house  by  cheques  of  other  brokers,  which  he  lodges  to  his 
credit  The  colonial  brokers  also,  and  other  clases  of  commercial  men, 
have  fixed  days  for  settling  their  accounts,  and  on  these  days  draw 
cheques  on  their  bankers  in  the  morning,  and  pay  in  cheques  to  meet 
them  at  a  subsequent  part  of  the  day.  Thus  the  institution  of  the  Clear- 
ing-house  has  become  entwined  with  the  commerce  of  the  country,  and 
could  not  be  discontinued  without  deranging  every  branch  of  business. 
It  has  also  received  the  sanction  of  the  law  of  the  land,  the  courts  of  law 
having  decided  that  the  presentment  of  a  bill  of  exchange  at  the  Clear- 
ing-bouse is  a  legal  presentment  In  this  case,  as  in  many  others,  the 
custom  of  bankers  and  merchants  has  become  law.  Many  of  our  com- 
mercial laws  have  had  the  same  origin.  They  have  at  first  been  mere 
regulations  established  by  merchants  for  their  own  convenience ;  these 
regulations  have  been  adopted  by  other  classes'  of  the  community  ;  they 
have  been  followed  for  a  number  of  years ;  and  then  the  Jaw  has  recog- 
nised them  as  a  portion  of  the  commercial  institutions  of  the  country. 
Such  was  the  origin  of  allowing  three  days'  grace  upon  bills  of  exchange, 
nA  such  has  been  the  case  with  the  Clearing-house.  The  Clearing- 
house  is  no  longer,  therefore,  a  private  subscription-room,  from  which  tlif- 
parties  admitted  may  exclude  whomsoever  they  please  at  their  own  ca- 
price. They  may  exclude  improper  banking  companies,  as  the  Edinburgh 
hanks  refuse  to  exchange  with  any  bank  that  is  not  respectable  ;  but  they 
are  bound  in  justice  to  admit  all  respectable  banks  who  may  apply  for 
...  :  .  i. 

**  Another  amendment  which  I  would  propose  as  connected  with  the 
currency  of  London,  would  be  a  regulation  of  the  Clearing-house  by  the 
Legislature.  Although  the  Clearing-house  was  a  voluntary  association 
of  bankers  at  first,  yet  it  has  now  existed  for  60  years,  and  has  become 
interwoven  with  several  branches  of  London  trade  ;  it  is  therefore  for  all 
practical  purposes  a  public  institution,  and,  like  a  market  or  any  other 
public  institution,  might  become  the  subject  of  legislative  interference. 
The  exclusion  of  banks  in  London  from  the  Clearing-house  whose  capi- 


The  Clearing-House. 

tal  now  amounts  to  about  two  millions  sterling,  and  who  have  about  2,000 
partners,  is  not  only  a  great  inconvenience  and  a  great  loss  to  those 
banks,  but  is  a  great  inconvenience  also  to  the  public  in  general,  and  such 
an  interference  with  the  freedom  of  trade,  as  carried  on  by  individual 
companies  in  London,  as  alone  would  justify  the  interference  of  the  Leg- 
islature ;  and,  besides,  it  is  quite  unreasonable  that  an  association  of  om- 
nibus proprietors  should  be  indicted  and  tried  for  a  conspiracy  because 
they  have  tried  to  run  a  rival  omnibus  off  the  road,  and  yet  that  a  body 
of  bankers  may  conspire  for  a  similar  object  without  any  interference  of 
the  Legislature  at  all."  (Evidence  of  J.  W.  Gilbart  before  the  Commit- 
tee on  Banks  of  Issue,  March,  1841.) 

The  following  evidence  was  given  by  the  Governor  of  the  Bank  of 
England,  before  the  Committee  on  Commercial  Distress,  in  answer  to 
questions  from  Sir  William  Clay  :  — 

"It  must  be  known  to  you,  I  suppose,  that  the  joint-stock  banks  of  London  are  ea 
eluded  from  the  Clearing-house  1  —  Yes. 

"  Are  you  of  opinion  that  that  exclusion  (which  of  course  it  is  perfectly  within  the 
right  and  discretion  of  private  banks  to  insist  upon,  if  they  please)  tends  to  public  in- 
convenience, inasmuch  as  it  lessens,  pro  tanto,  that  economy  of  the  circulating  medium 
which  the  Clearing-house  is  calculated  to  produce  ?  —  Allowing  joint-stock  banks  to 
clear  with  other  bankers,  I  have  no  doubt  would  produce  an  economy  in  the  use  of 
bank  notes. 

".And  economy  in  the  circulating  medium  ?  —  And  economy  in  the  circulating  me- 
dium. 

"  Have  you  any  means  of  ascertaining  the  amount  to  which  the  admission  to  the 
Clearing-house  of  joint-stock  banks  would  economize  the  amount  of  circulation  now 
required  for  the  use  of  London  1  —  I  have  not ;  I  have  heard  it  stated  at  half  a  mil- 
lion, but  I  cannot  say  if  that  is  correct. 

"I  believe  that  the  chairman  of  one  large  London  joint-stock  bank,  namely,  the 
London  and  Westminster,  did  state  publicly  that  they  were  under  the  necessity  of 
keeping  a  reserve  of  £  150,000  in  bank  notes,  more  than  it  would  have  been  necessary 
for  them  to  keep  if  they  had  been  admitted  to  the  Clearing-house  ?  —  I  know  that  he 
made  some  statement  of  that  sort ;  I  cannot  say  what  it  was. 

"  That  must  imply,  not  perhaps  the  necessity  of  a  corresponding  amount  being  kept 
by  all  private  banks,  but  something  approaching  to  it,  inasmuch  as  all  cheques  on 
such  banks  held  by  joint-stock  banks  must  be  presented  in  the  course  of  the  morning 
at  the  banks,  instead  of  being  brought  to  the  Clearing-house  in  the  evening?  — Yes. 

"  It  is,  therefore,  not  merely  the  amount  of  notes  which  the  joint-stock  banks  are 
obliged  to  keep  in  reserve,  but  the  amount  of  extra  bank  notes  which  the  private  bank- 
ers are  obliged  to  keep  in  reserve  ?  —  Yes. 

w'  There  are,  besides  the  London  and  Westminster,  four  other  joint-stock  banks  in 
London ;  I  believe  their  capital,  from  the  published  reports,  amount  to  £  2,645,000 
paid-up  capital,  and  their  deposits  to  £  8,864,000,  together  £  1 1,509,000,  of  which  these 
joint-stock  banks  have  the  control  1  —  I  cannot  say  whether  those  figures  are  correct 
or  not. 

"But  assuming  that  those  figures  are  correct,  and  that  it  is  also  correct  that  one  of 
these  banks,  namely,  the  London  and  Westminster,  is  compelled  to  keep  £150,000 
more  of  notes  in  reserve,  because  they  are  not  admittted  to  the  Clearing-house,  is  it 
not  probable  that  the  sum  you  have  mentioned  of  £  500,000  is  not  too  large  an  esti- 
mate of  the  increased  quantity  of  circulating  medium,  which  is.  rendered  necessary  by 
the  circumstance  of  these  joint-stock  banks  not  being  admitted  to  the  Clearing-house  ? 
—  Assuming  as  a  fact,  that  the  London  and  Westminster  Bank  keep  £150,000  of 
notes  more  than  they  would  otherwise  keep  in  consequence  of  not  being  able  to  clear, 
probably,  I  should  say,  that  that  statement  is  correct. 

"But  at  all  events,  without  assuming  that  these  figures  are  exactly  correct,  is  it  not 
true,  that  that  exclusion  must,  in  reality,  produce  the  necessity  for  a  larger  amount  of 
circulating  medium  to  supply  the  daily  necessities,  of  the  public  ?  — Yes." 

283 


A  TruUite  on  Banking. 


Stcrio*  IV.— THE  COUNTRY  PRIVATE  BANKS. 

THESE  bank*  cannot  have  more  than  six  partners.  They  are  banks  of 
deposit,  of  loan,  and  of  discount.  As  bank:)  of  deposit,  they  usually  al- 
low interest  on  both  deposits  and  balances  of  current  accounts,  and 
charge  ft  commission  on  the  amount  of  the  transactions.  In  commercial 
or  manufacturing  district*  their  advances  arc  usually  made  by  way  of  dis- 
count ;  in  agricultural  districts,  frequently  by  loans.  They  remit  money 
by  issuing  bills  or  letters  of  credit  on  London,  or  they  direct  their  agents 
to  make  payments  to  bonkers  or  other  parties  resident  in  London.  As 
banks  of  circulation,  they  have  at  various  times  occupied  a  large  portion 
of  public  attention,  and  have  been  the  subject  of  much  legislation. 

Those  bankers  who  wish  to  issue  notes  must  take  out  a  license,  which 
will  cost  £  30  and  must  be  renewed  every  year.  They  may  re-issue 
any  notes  not  above  the  value  of  £  100  as  often  as  they  think  proper. 
And  should  any  of  the  firm  die  or  remove  from  the  business,  the  notes 
may  be  issued  by  the  remaining  partners.  But  they  cannot  be  re-issued 
by  a  new  firm,  which  does  not  include  any  member  belonging  to  the  firm 
by  whom  the  notes  were  first  issued. 

If  the  half  of  a  note  be  lost  or  stolen,  a  banker  cannot  be  compelled  to 
give  a  new  note  in  exchange  for  the  remaining  half.  But  if  it  cnn  be 
proved  that  one  half  of  a  note  is  burnt,  or  otherwise  destroyed,  then  the 
holder  may  perhaps  recover  the  note  from  the  banker. 

In  inch  cases,  the  bankers  always  pay  the  value  of  the  note  on  receiv- 
ing a  respectable  indemnity. 

Bankers  may  be  compelled  to  pay  whole  notes  that  have  been  lost  or 
stolen,  provided  the  holder  has  given  actual  value  for  them. 

The  stamp  duty  on  country  notes  is  as  follows  :  — 

£   «.  £    s.  s.    d. 

Note*  not  exceeding    11  ...  ...  ...  €5   each. 

Exceeding                1     1  and  not  exceeding  22  0  10     " 

Ditto                      22  5518" 

Ditto          "55  «  10    0  1     9      " 

Ditto          "100  "  tt  200  20" 

Ditto          "200  a  «  300  30" 

Ditto          "300  "  u  500  50" 

Ditto          "500  «  «  100    0  86" 

Country  banks  are  allowed  to  compound  for  the  stamp  duties  on  their 
••IBs,  at  the  rate  of  seven  shillings  per  cent,  per  annum  upon  the  amount 
in  circulation,  and  to  include,  on  the  same  terms,  their  bills  drawn  on 
London  at  twenty-one  days  after  date.  But  whether  a  country  banker 
compounds  for  the  stamp  duties  or  not,  he  must  make  a  return  to  the 
Government  of  the  amount  of  his  notes  in  circulation  every  Saturday 
night  These  returns  are  consolidated,  and  the  result  published  in  the 
London  Gazette. 

The  following  are  the  enactments  respecting  country  bankers  in  the 
Act  7  &  8  Viet  c.  32,  passed  in  1844  :  — 


Country  Private  Banks. 

No  New  Bank  of  Issue. 

"  X.  And  be  it  enacted,  That  from  and  after  the  passing  of  this  Act,  no  person  other 
than  a  banker,  who,  on  the  sixth  day  of  May,  one  thousand  eight  hundred  and  forty-four, 
was  lawfully  issuing  his  own  bank  notes,  shall  make  or  issue  bank  notes  in  any  part  of  the 
United  Kingdom.'' 

Restriction  against  Issue  of  Bank  Notes. 

"  XI.  And  be  it  enacted,  That  from  and  after  the  passing  of  this  Act,  it  shall  not  be 
lawful  for  any  banker  to  draw,  accept,  make,  or  issue,  in  England  or  Wales,  any  bill 
of  exchange,  or  promissory  note,  or  engagement  for  the  payment  of  money  payable 
to  bearer  on  demand,  or  to  borrow,  owe,  or  take  up,  in  England  or  Wales,  any  "sums 
or  sum  of  money  on  the  bills  or  notes  of  such  banker  payable  to  bearer  on  demand, 
save  and  except  that  it  shall  be  lawful  for  any  banker  who  was  on  the  sixth  day  of 
May,  one  thousand  eight  hundred  and  forty-four,  carrying  on  the  business  of  a  banker 
in  England  or  Wales,  and  was  then  lawfully  issuing,  in  England  or  Wales,  his  own 
bank  notes,  under  the  authority  of  a  license  to  that  effect,  to  continue  to  issue  such 
notes,  to  the  extent  and  under  the  conditions  hereinafter  mentioned,  but  not  further  or 
otherwise ;  and  the  right  of  any  company  or  partnership  to  continue  to  issue  such 
notes  shall  not  be  in  any  manner  prejudiced  or  affected  by  any  change  which  may 
hereafter  take  place  in  the  personal  composition  of  such  company  or  partnership, 
either  by  the  transfer  of  any  shares  or  share  therein,  or  by  the  admission  of  any  new 
partner  or  member  thereto,  or  by  the  retirement  of  any  present  partner  or  member 
therefrom  :  Provided  always,  that  it  shall  not-  be  lawful  for  any  company  or  partnership 
now  consisting  of  only  six  or  less  than  six  persons  to  issue  bank  notes  at  any  time  after  the 
number  of  partners  therein  shall  exceed  six  in  the  whole." 

Bankers  ceasing  to  issue  Notes  may  not  resume. 

"  XII.  And  be  it  enacted,  That  if  any  banker  in  any  part  of  the  United  Kingdom 
•who,  after  the  passing  of  this  Act,  shall  be  entitled  to  issue  bank  notes,  shall  become 
bankrupt,  or  shall  cease  to  carry  on  the  business  of  a  banker,  or  shall  discontinue  the 
issue  of  bank  notes,  either  by  agreement  with  the  Governor  and  Company  of  the  Bank 
of  England  or  otherwise,  it  sltall  not  be  lawful  for  such  banker  at  any  time  thereafter  to 
issue  any  such  notes." 

Existing  Banks  of  Issue  to  continue  under  certain  Limitations. 

"  XIII.  And  be  it  enacted,  That  every  banker  claiming  under  this  Act  to  continue 
to  issue  bank  notes  in  England  or  Wales  shall,  within  one  month  next  after  the  pass- 
ing of  this  Act,  give  notice  in  writing  to  the  Commissioners  of  Stamps  and  Taxes, 
at  their  head  office  in  London,  of  such  claim,  and  of  the  place,  and  name,  and  firm,  at 
and  under  which  such  banker  has  issued  such  notes  during  the  twelve  weeks  next  preced- 
ing the  twenty-seventh  day  of  April  last ;  and  thereupon  the  said  commissioners  shall  as- 
certain if  such  banker  was  on  the  sixth  day  of  May,  one  thousand  eight  hundred  and 
forty-four,  carrying  on  the  business  of  a  banker,  and  lawfully  issuing  his  own  bank 
notes  in  England  or  Wales,  and  if  it  shall  so  appear,  then  the  said  commissioners  shall 
proceed  to  ascertain  the  average  amount  of  the  bank  notes  of  such  banker  which  were 
in  circulation  during  the  said  period  of  twelve  weeks  preceding  the  twenty-seventh 
day  of  April  last,  according  to  the  returns  made  by  such  banker  in  pursuance  of  the 
Act  passed  in  the  fourth  and  fifth  years  of  the  reign  of  her  present  Majesty,  entitled 
'  An  Act  to  make  further  Provision  relative  to  the  Returns  to  be  made  by  Banks  of 
the  Amount  of  their  Notes  in  circulation ' ;  and  the  said  commissioners,  or  any  two 
of  them,  shall  certify  under  their  hands  to  such  banker  the  said  average  amount,  when 
so  ascertained  as  aforesaid ;  and  it  shall  be  lawful  for  every  such  banker  to  continue 
to  issue  his  own  bank  notes  after  the  passing  of  this  Act :  Provided  nevertheless,  that 
such  banker  shall  not  at  any  time  after  the  tenth,  day  of  October,  one  thousand  eight  hundred 
and  forty-four,  have  in  circulation  upon  tlie  average  of  a  pe.riod  of  four  weeks,  to  be  ascer 
lainea  as  hereinafter  mentioned,  a  greater  amount  of  notes  than  the  amount  so  certified. 

Provision  for  United  Banks. 

"  XIV.  Provided  always,  and  be  it  enacted,  That  if  it  shall  be  made  to  appear  to 
the  Commissioners  of  Stamps  and  Taxes  that  any  two-«r  more  banks  have,  by  written 

285 


A  Trtatite  on  Banking. 

ent  (which  contmrt  or  agreement  shall  be  produced  to  the  said  com- 
OM  Matted  within   the  twelve  week*  next  preceding  •udi  t«.  m\- 
.  da  j  of  April  M  aforesaid,  it  ihall  be  lawful  for  the  said  commissioners  to  as- 
_  i  ««  average  «JDO«nl  of  UM  note*  of  earh  such  bank  in  tin-  inannrr  hereinbefore 
directed,  aad  to  certify  the  average  amount  of  the  note*  of  the  two  or  more  banks  so 
as  dM  •MMQt  which  the  united  bank  shall  thereafter  be  autliorizcd  to  issue, 
•»  *•  NfaUttfons  of  this  Act. 


agreemen 
becaOM 


P^fliiaW  fVtilfniBli  Co  llr  fi  -"••-»-»  --  -1-  "  —  "'     Gazette  to  be  Evidence. 

"  XV.  Aad  be  it  enacted,  That  the  Commissioners  of  Stamps  and  Taxes  shall,  at 
the  time  of  eentrVlag  to  any  banker  such  particulars  as  they  are  hereinbefore  required 
to  certify,  sJso  pnUiih  a  duplicate  of  their  certificate  thereof  in  the  next  succo 
Lm4m  Gustst  in  which  the  same  may  be  conveniently  inserted;  and  the  gazer 
wMdi  each  publication  shall  be  made  shall  be  exclusive  evidence  in  all  courts  what- 
of  the  amount  of  bank  notes  which  the  banker  named  in  such  certificate  or 
is  by  law  authorized  to  issue  and  to  have  in  circulation  as  aforesaid. 


/•  cam  Bants  HMDBM  nutted!,  Commissioners  to  certify  On  Amount  of  Bank  Note*  which  each 
BtaJc  was  mmtkofitid  to  torn. 

•XVI.  And  bo  it  enacted,  That  in  case  it  shall  be  made  to  appear  to  the  Commis- 
sioners of  Stamps  and  Taxes,  at  any  time  hereafter,  that  any  two  or  more  banks. 
Mch  bank  consisting  of  not  more  than  six  persons,  have,  by  written  contract  or  agreement 
(which  contract  or  agreement  shall  be  produced  to  the  said  commissioners),  become 
*    ibseqnently  to  the  passing  of  this  Act,  it  shall  he  lawful  to  the  said  commis- 


afoBers,  upon  the  application  of  such  united  bank,  to  certify,  in  manner  hereinbefore 
•Mtioaea,  die  aggregate  of  the  amounts  of  bank  notes  which  such  separate  banks 
were  pnvfaxuly  authorized  to  issue,  and  so  from  time  to  time  ;  mid  every  such  cer- 
tificate shall  be  published  in  manner  hercinU-fore  directed  ;  and  from  and  after  such 
pablication  the  amount  therein  stated  shall  he  and  be  deemed  to  be  the  limit  of  the 
amoant  of  hank  notes  which  such  united  bank  may  have  in  circulation  :  Provided  al- 
ways, that  it  shall  mot  be  lawful  for  any  inch  united  bank  to  iuue  bank  notes  at  any  time  after 
the  nmmber  of  partner*  therein  shall  exceed  fix  in  the  whole. 

Penalty  on  Bank*  issuing  in  Excess. 

u  XVII.  And  be  it  enacted,  That  if  the  monthly  average  circulation  of  bank  notes 
of  any  banker,  taken  in  the  manner  hereinafter  directed,  shall  at  any  time  exceed  the 
which  such  banker  is  authorized  to  issue  and  to  have  in  circulation  under  the 

ise  forfeit  a  sum  n/wil  to  the 
as  aforesaid,  shall  have  ex- 
>  issue  and  to  hare  in  circula- 
tion as  aforesaid. 

Issuing  Banks  to  render  Accounts. 

"  XVIII.  And  be  it  enacted,  That  every  banker  in  England  and  Wales  who,  after 
the  tenth  day  of  October,  one  thousand  ei^ht  hundred  and  forty-four,  shall  issue  bank 
notea,  shall  on  some  one  day  in  every  week  after  the  nineteenth  day  of  October,  one 
dKMHud  eight  hundred  and  forty-four  (such  day  to  be  fixed  by  the  Commissioners  of 
Sump*  and  Taxes)  transmit  to  the  said  commissioners  an  account  of  the  amount  of 
the  bink  notes  of  such  banker  in  circulation  on  every  day  during  the  week  ending  on 
Ike  next  preceding  Saturday,  and  also  an  account  of  the  average  amount  of  the  bank 
MMes  of  »«ch  beaker  in  circulation  during  the  same  week ;  and  on  completing  the 
firrt  period  of  Soar  weeks,  and  so  on  completing  each  successive  period  of  four  weeks, 
my  Men  banker  shall  annex  to  such  account  the  average  amount  of  hank  notes  of 
banker  in  drealatfam  during  the  said  four  weeks,  and  also  the  amount  of  Nank 
•  *^J5*  f**  Dfa^*r  *•  •othorized  to  issue  under  the  provisions  of  this  Act ;  and 
MCtt  aecowit  shall  be  verified  by  the  signature  of  such  banker  or  his  chief 
r, or,  i«  the  case  of  s^  company  or  partnership,  by  the  signature  of  a 


director,  or  partner,  or  chief  cashier  of  such  company  or  purtnershij),  nn<l   -hull   IK; 

made  in  the  form  to  this  Act  annexed  marked  (B.) ;  and  so  much  of  t!. 

M  sttsw  OM  weeklj  average  amount  of  die  notes  of  such  bank  shall  be  publi-hcil  i»  v 

IN 


Country  Private  Banks. 

the  said  commissioners  in  the  next  succeeding  London  Gazette  in  which  the  same  may 
be  conveniently  inserted ;  and  if  any  such  banker  shall  neglect  or  refuse  to  render  any 
such  account  in  the  form  and  at  the  time  Acquired  by  this  Act,  or  shall  at  any  time 
render  a  false  account,  such  banker  shall  'forfeit  the  sum  of  one  hundred  pounds  for 
every  such  offence. 

Mode  of  ascertaining  the  Average  Amount  of  Bank  Notes  of  each  Banker  in  circulation 
during  the  first  Four  Weeks  after  10th  October,  1844. 

"  XIX.  And  be  it  enacted,  That  for  the  purpose  of  ascertaining  the  monthly  aver- 
age amount  of  bank  notes  of  each  banker  in  circulation,  the  aggregate  of  the  amount 
of  bank  notes  of  each  such  banker  in  circulation  on  every  day  of  business  during  the 
first  complete  period  of  four  .weeks  next  after  the  tenth  day  of  October,  one  thousand 
eight  hundred  and  forty-four,  such  period  ending  on  a  Saturday,  shall  be  divided  by 
the  number  of  days  of  business  in  such  four  weeks,  and  the  average  so  ascertained 
shall  be  deemed  to  be  the  average  of  bank  notes  of  each  such  banker  in  circulation 
during  such  period  of  four  weeks,  and  so  in  each  successive  period  of  four  weeks,  and 
such  average  is  not  to  exceed  the  amount  certified  by  the  Commissioners  of  Stamps 
and  Taxes  as  aforesaid." 

Bankers  to  take  out  a  separate  License  for  every  Place  at  which  they  issue  Notes  or  Bills. 
Proviso  in  Favor  of  Bankers  who  had  Four  such  Licenses  in  force  on  the  6th  of  May, 
1844. 

"  XXII.  And  be  it  enacted,  That  every  banker  who  shall  be  liable  by  law  to  take 
out  a  license  from  the  Commissioners  of  Stamps  and  Taxes  to  authorize  the  issuing 
of  notes  or  bills  shall  take  out  a  separate  and  distinct  license  for  every  town  or  place  at 
which  he  shall,  by  himself  or  his  agent,  issue  any  notes  or  bills  requiring  such  license 
to  authorize  the  issuing  thereof,  any  thing  in  any  former  Act  contained  to  the  contrary 
thereof  notwithstanding :  Provided  always,  that  no  banker  who  on  or  before  the  sixth 
day  May,  one  thousand  eight  hundred  and  forty-four,  had  taken  out  four  such  licenses, 
which  on  the  said  last-mentioned  day  were  respectively  in  force,  for  the  issuing  of  any 
such  notes  or  bills  at  more  than  four  separate  towns  or  places,  shall  at  any  time  here- 
after be  required  to  take  out  or  to  have  in  force  at  one  and  the  same  time  more  than 
four  such  licenses  to  authorize  the  issuing  of  such  notes  or  bills  at  all  or  any  of  the 
same  towns  or  places  specified  in  such  licenses  in  force  on  the  said  sixth  day  of  May, 
one  thousand  eight  hundred  and  forty-four,  and  at  which  towns  or  places  respectively 
such  bankers  had  on  or  before  the  said  last-mentioned  day  issued  such  notes  or  bill's 
in  pursuance  of  such  licenses  or  any  of  them  respectively. 

It  will  be  seen  from  these  extracts  that  the  provisions  of  the  Act  re- 
quire :  — 

1.  That  no  new  bank  of  issue  be  established  in  the  United  Kingdom. 

2.  That  the  maximum  of  each  bank  of  issue  in  England  shall  be  the 
average  of  the  notes  in  circulation  during  the  four  weeks  ending  the  27th 
of  April,  1844. 

3.  That  if  any  bank  having  not  more  than  six  partners  should  exceed 
that  number,  it  would  lose  its  issue.     This  tends  to  prevent  private  banks 
merging  into  joint-stock  banks. 

4.  That  no  union  can  take  plac'e  between  a  joint-stock  bank  and  a  pri- 
vate bank,  or  between  two  joint-stock  banks  of  issue,  without  one  of  them 
at  least  losing  its  circulation. 

5.  Every  new  branch  at  which  notes  shall  be  issued  must  take  out  a 
separate  license.     Hitherto  no  bank  had  been  obliged  to  take  out  more 
than  four  licenses,  however  numerous  its  branches.     This  tends  to  check 
the  opening  of  new  branches  of  issue. 

It  has  been  stated  that  the  object  of  this  Act  was  to  pave  the  way  for 
the  establishment  of  one  bank  of  issue.  These  provisions  are  certainly 

287 


A  Trtatise  on  Banking. 

not  ill  adapted  for  such  an  end.  They  will  reduce  the  amount  of  the 
country  circulation.  They  will  produce  other  ill  effects.  The  formation 
of  large  banks  will  be  retarded.  In  some  places  it  would  be  for  tin-  pul>- 
lic  advantage  that  a  private  bank  should  become  a  joint-stock  bank.  In 
other  district*,  it  mi-ilu  be  desirable  that  two  small  joint-stock  banks  of 
issue  should  unit  and  form  a  large  one.  The  restrictions  imposed  by  this 
Act  will  tend  to  prevent  such  unions.  Perhaps  in  other  respects  its  effects 
may  be  beneficial.  It  may  lead  a  larger  number  of  persons  to  k.-i-p  cur- 
rent accounts  with  bankers,  and  to  make  their  payments  with  cheques. 
A  smaller  amount  of  notes  will  then  be  necessary  for  the  purposes  of  the 
country.  The  advantages  of  having  a  banker  will  be  extended  to  tin- 
middle'  and  lower  classes,  and  will  not  as  much  as  heretofore  be  confined 
to  the  wealthy.  The  Act,  too,  may  have  the  effect  of  exempting  the 
banks  of  issue  from  those  accusations  to  which  they  have  always  been 
subjected  on  the  occurrence  of  any  national  calamity.  The  whole  Act  of 
1844  is  formed  upon  the  notion  that  the  country  bankers  can  extend  their 
issues  as  much  as  they  please,  —  "  a  vulgar  error,"  that  has  over  and  over 
•gain  been  abundantly  refuted.  Yet,  had  the  Act  not  been  passed,  and 
had  the  country  circulation  increased  a  million  or  two,  as  possibly  it  might, 
from  the  increased  transactions  of  the  country,  the  railway  speculations  of 
1815  and  1846  would  doubtless  have  been  ascribed  to  the  excessive  issues 
of  the  country  banks.  The  following  language,  which  I  addressed  in 
1844  to  the  joint-stock  banks,  may  not  be  considered  inapplicable  to  all 
banks  of  issue  :  — 

44  Another  advantage  is,  that  the  joint-stock  banks  of  issue  will  be  de- 
livered from  those  unjust  accusations  to  which  they  have  hitherto  been  ex- 
posed. Almost  every  evil  that  has  befallen  the  country  for  the  lust  ten 
years  has  been  ascribed  by  different  writers  to  the  reckless  issues  of  the 
joint-stock  banks  ;  and  though  the  charge  has  been  oft  refuted,  yet  such 
has  been  the  talent,  zeal,  and  perseverance  with  which  it  has  been  re- 
vived, that  it  has  doubtless  in  some  degree  prejudiced  the  public  mind. 
But  now  this  charge  con  be  made  no  more.  Our  assailants  arc  compelled 
to  observe  at  least  a  ten  years1  truce.  During  this  period  we  shall  have 
no  bank  directors  publishing  pamphlets  to  show  that  their  efforts  to  regu- 
late the  exchanges  have  been  counteracted  by  the  imprudent  issues  of  the 
joint-stock  banks.  Our  notes  will  not  again  be  classed  by  the  authors  of 
4  prize  essays*  among  the  causes  of  national  distress,  and  philosophical 
writers  will  no  longer  declaim,  in  eloquent  metaphor,  against '  the  wild 
democracy  of  rival  issuers.'  It  is  no  small  matter  to  be  put  into  a  position 
wherein  we  shall  be  sheltered  from  the  peltings  of  unjust  accusations." 
(Letlm  of  Nehemiah,  p.  11.) 

Some  banks  had  ceased  to  issue  their  notes  before  the  passing  of  the 
Act,  by  virtue  of  agreements  with  the  Bank  of  England.  The  twenty- 
'  section  of  the  Act  contains  a  special  provision  with  reference  to  these 


to  certain  Banker*  named  in  the  Schedule. 

JLJUII.  And  where**  the  icreral  banker*  named  in  the  schedule  hereto  annexed 
(C.)  bare  cawed  to  brae  their  own  bank  notes  under  certain  agreements  with 
ygreiuor  ss4  company  of  the  Bank  of  England  ;  and  it  is  expedient  that  mch 


Country  Private  Banks. 

agreements  should  cease  and  determine  on  the  thirty-first  day  of  December  next,  and 
that  such  bankers  should  receive  by  way  of  compensation  such  composition  as  hereafter 
mentioned :  and  a  list  of  such  bankers,  and  a  statement  of  the  maximum  sums  in  re- 
spect of  which  each  such  banker  is  to  receive  compensation,  hath  been  delivered  to  the 
Commissioners  of  Stamps  and  Taxes,  signed  by  the  chief  cashier  of  the  Bank  of  Eng- 
land ;  be  it  therefore  enacted,  That  the  several  agreements  subsisting  between  the  said 
governor  and  company  and  the  several  bankers  mentioned  in  the  schedule  hereto  re- 
lating to  the  issue  of  Bank  of  England  notes  shall  cease  and  determine  on  the  thirty- 
first  day  of  December  next ;  and  from  and  after  that  day  the  said  governor  and  com- 
pany shall  pay  and  allow  to  the  several  bankers  named  in  the  schedule  hereto  marked 
(C.),  so  long  as  such  bankers  shall  be  willing  to  receive  the  same,  a  composition  at  and 
after  the  rate  of  one  pound  per  centum  per  annum  on  the  average  amount  of  the  Bank 
of  England  notes  issued  by  such  bankers  respectively  and  actually  remaining  in  circu- 
lation, to  be  ascertained  as  follows  ;  that  is  to  say,  on  some  day  in  the  month  of  April, 
one  thousand  eight  hundred  and  forty-five,  to  be  determined  by  the  said  governor  and 
company,  an  account  shall  be  taken  of  the  Bank  of  England  notes  delivered  to  such 
bankers  respectively  by  the  said  governor  and  company  within  three  months  next  pre- 
ceding, and  of  such  of  the  said  Bank  of  England  notes  as  shall  have  been  returned  to 
the  Bank'of  England,  and  the  balance  shall  be  deemed  to  be  the  amount  of  the  Bank 
of  England-  notes  issued  by  such  bankers  respectively  and  kept  in  circulation ;  and  a 
similar  account  shall  be  taken  at  intervals  of  three  calendar  months  ;  and  the  average 
of  the  balances  ascertained  on  taking  four  such  accounts  shall  be  deemed  to  be  the 
average  amount  of  Bank  of  England  notes  issued  by  such  bankers  respectively  and 
kept  in  circulation  during  the  year  one  thousand  eight  hundred  and  forty-five,  and  on 
which  amount  such  bankers  are  respectively  to  receive  the  aforesaid  composition  of 
one  per  centum  for  the  year  one  thousand  eight  hundred  and  forty-five ;  and  similar 
accounts  shall  be  taken  in  each  succeeding  year ;  but  in  each  year  such  accounts  shall 
be  taken  in  different  months  from  those  in  which  the  accounts  of  the  last  preceding 
year  were  taken,  and  on  different  days  of  the  month,  such  months  and  days  to  be  de- 
termined by  the  said  governor  and  company ;  and  the  amount  of  the  composition  pay- 
able as  aforesaid  shall  be  paid  by  the  said  governor  and  company  out  of  their  own 
funds  ;  and  in  case  any  difference  shall  arise  between  any  of  such  bankers  and  the 
governor  and  company  of  the  Bank  of  England  in  respect  of  the  composition  payable 
as  aforesaid,  the  same  shall  be  determined  by  the  Chancellor  of  the  Exchequer  for  the 
time  being,  or  by  some  person  to  be  named  by  him,  and  the  decision  of  the  Chancellor 
of  the  Exchequer,  or  his  nominee,  shall  be  final  and  conclusive  :  Provided  always,  that 
it  shall  be  lawful  for  any  banker  named  in  the  schedule  hereto  annexed  marked  (C.) 
to  discontinue  the  receipt  of  such  composition  as  aforesaid,  but  no  such  banker  shall 
by  such  discontinuance  as  aforesaid  thereby  require  any  right  or  title  to  issue  bank 
notes." 

The  following  are  the  Banks  named  in  the  schedule :  — 

Bank  of  Liverpool .  Liverpool. 

J.  Earned  &  Co .        1.    '       ditto. 

Biddulph,  Brothers,  &  Co.    .        .        .  *.    .        .        .  Pembroke. 

Birmingham  Banking  Company       ....  Birmingham 

Birmingham  Town  &  District  Bank     ....        ditto. 

Birmingham  and  Midland  Banking  Company  .        .  ditto. 

Burgess  &  Son     .        ...        .        .        .        .        .  Eamsgate. 

Coopers  &  Purton     .        .        *        .  •      .        .        .  Bridgenorth. 

Cunliffes,  Brookes,  &  Co Blackburn. 

Deane,  Littlehales,  &  Deane Winchester. 

Dendy,  Comper,  &  Co.          .        .        .      '  •      .  •        .  Chichcster. 

Devon  and  Cornwall  Banking  Company  .        .        .  Plymouth. 

Grants  &  Gillman Gosport. 

Hampshire  Banking  Company ...        .        .  Southampton. 

James  W.  R  Hall        .......  Ross. 

J.  M.  Head  &  Co. Carlisle. 

Henty,  Upperton,  &  Olliver Arundcl. 

Thomas  Kinnersly  &  Sons Newcastle-undcr-Line. 

R.  J.  Lambton  &  Co Ncwcastle-on-Tync. 

Y  289 


A  TVeofiM  OH  Banking. 


Lhwpcol  PommwUI  B«kiBf  Company        .        .  Lirerpool. 

1    •  '•     -  ......  I-'41''!  .....  I- 

Lbnool  Boron*  Bank  ......  <lnt<>. 

IfaMMMcr  MM|  Uwrpool  District  Bunking  Company  Manchester. 
Manrhc*utr  and  SaUbrd  Banking  Company          .        .        <liii<>. 

MoMMMlh  and  Glamorgan  Banking  Company         .  Newport. 

MOM  4  Company         .......  l.iv.-rpool. 

Mangiea,  DrodMn     .......  (itiildfonl. 

TfiwcMlfa  Ooamsfciil  Banking  Company  .        .        .  Newcastle-on-Tyne. 
NcwcMtle-oa-Tyn*  Joint-Stork  Banking  "Company  .  <litto. 

Noctfcof  England  Joint-Stock  Bunking  Company         .        ditto. 
Nortbu)k*riand  and  Durham  I  >i*irirt  Hunk     .         .  ditto. 

Itwlsmoath  MM!  South  llanu  Bauk  Company      .        .  Portsmouth. 

T.  4  R  Raikes  4  Co.       ......  Hull. 

Robtaaoa  4  Broadhurst        .  .  Mansfield. 

Bhrfbld  Umion  Bank       ...  .  Sheffield. 

JotwStovvld        ........ 

IhailstUiJ  luhi  •»»%  Ihrtiiig  Company      .        .  Sundcrland. 

T»mU4Co  .........  l».uh. 

.  Union  Bank  of  Manchester       .....  Manchester.    • 

Virun,  Kit*on,  4  Co  ........  Torquay. 

Wans,  Whitcway,  4  Co.  ......  Newton. 

J.  4  J.  C.  Wrifftit  4  Co  .......  Nottingham. 

W«bb,  llolbrook,  4  Spencer     .....  Ledbury. 

The  following  account  of  the  state  of  the  fixed  issue  under  this  Act  is 
taken  from  the  "  Banking  Almanac  "  for  1849,  page  37  :  — 

At  Oct.,  1S48. 
Fixed  tone  of  the  Private  Bank*  (England  and  Wales)  by  the  Act  of 

1944,      .............  £5,153,407 

Deduct  21  Frirate  Banks,  since  ceased  to  issue,    .....  330,919 

Amount  of  Private  Banks'  issue,        ......  £  4,822,488 

Fixed  Issue  of  Joint-stock  Banks,  by  same  Act,        .        .        £3,495,446 
Deduct  6  Joint-stock  Banks,  since  ceased  to  issue,        .        .  85,459 

Amount  of  Joint-stock  Banks'  issue,  ......  £3,409,987 

Fixed  issue  of  Private  and  Joint-stock  Banks,        .        .        .        £8,232,475 

PRESEWT  STATE  OF  THE  FIXED  IBBUEB. 

1.  Fixed  issue  in  England  and  Wales,      .......  £8,232,475 

S.  Bank  of  England,      .......          14,000,000 

8.  Banks  in  Scotland,        .......       3,d 

4.  Banks  in  Ireland,     .......  6,354,494 


Fixed  issne  in  the  United  Kingdom,  at  7th  October,  1848,   . 


.£31,674,178 


NUMBER  OF  BANKS  OF  ISSUE  IN  THE  UNITED  KINGDOM. 

At  October  7,  1843. 

1  Bank  of  England  in  England  and  Wales,  having     .        .        .        .14  Banks. 
1*4  Private  Banking  Firms  in  England  and  Wales,  having  375       u 

M  Joint-stock  Banking  Companies  in  England  and  Wales,  having      .    407      " 

251  Firms  and  Companies  id  England  and  Wales,  having         .        .         796  Banks. 
1*  Joint- Stock  Banking  Companies  in  Scotland,  having       .        .        .403       " 

in  Ireland,  having    .        .        .         155      " 

177  Finn*  and  Companies  in  the  United  Kingdom,  having     .        .        .  1354  Banks. 


Country  Private  Banks. 


REDUCTION  IN  THE  FIXED  ISSUES  IN  ENGLAND  AND  WALES. 

The  Maximum  Circulation  of  the  Private.cmd  Joint-Stock  Banks  was  reduced  at  the  under- 
mentioned dates,  by  t/te  following  Banks  Iiaving  ceased  to  issue  their  own  Notes  :  — 


Date  of  last 
Return. 


Prior  to  the 
12th  Oct., 
1844,  when 
the  Act 
came  into 
operation. 


NAMES. 

1.  Bristol  Old  Bank.  —  Baillie,  Ames,  &  Co.  .       .  Bank  of  Eng.  Notes. 

2.  Bishop  Waltham,  Hampshire.  —  Gunrier  &  Co.  Ditto. 

3.  Cambridge  Bank.  —  Fisher  &  Sons.         .        .  Ditto. 

4.  Ditto.  —Humphrey  &  Son.        .        .  Closed,  1845. 

5.  Margate  Bank.  —  Cobb  &  Co.          .        .       .      Bank  of  Eng.  Notes. 

6.  Oxford  Univ.  and  City  Bank.— Sir  J.Locke  &  Co.  Ditto. 

7.  Staines  Bank.  —  Thos.  Ashley  &  Co.  .        .        .  Ditto. 

8.  Wrexham  and  N.  Wales  Bank.  —  R.  M.  Loyd.  Ditto. 
_  1.  Western  District  Joint-Stock  Banking  Company.  Dissolved. 


April  12,  1845    9.  Whitby  Bank.—  Frankland  &  Wilkinson.      .      York  City  and  C'nty. 

1 

2,076 

Sept.  13,     "      2.  Suffolk  Joint-Stock  Banking  Company.       .        .  Dissolved.        .        . 

6 

7,449 

April  11,  1846  10.  Dover  Union  Bank.  —  Latham  &  Co.       .        .      Bankrupts.. 

1 

9,577 

July  4,        "      3.  Stockton  &  Durham  County  Joint-Stock  Bank.     Dissolved. 

2 

8,290 

Oct.  10,      "    11.  Romsey&  Hamp.  Bank.—  Wm.  Footner  &  Sons.Bank  of  Eng.  Notes. 

1 

3,875 

Dec.  5,       "      4.  Leeds  &  West  Riding  Joint-Stock  Banking  Co.   .Dissolved.    . 

2 

18,937 

May  29,  1847    5.  Leeds  Commercial  Joint-Stock  Bank.       .        .          Ditto.  . 

1 

13,914 

Oct.  9,       "    12.  Abingdon  &  Wantage.  —  Henry  Knapp.      .        .Bankrupt.     . 

2 

29,316 

"    13.  Penzance  Union  Bk.  —  Ricketts,  Enthoven  &  Co  

4 

31,461 

Oct.  16,      "    14.  Leek  &  Congleton.  —Fowler,  Gaunt,  &  Co.        .  Bank  of  Eng.  Notes. 

ft 

4,009 

Oct.  23,      '•    15.  Salisbury  &  Fordingbridge  Bk.  —  Brodie  &  Co.     Bankrupts. 

8 

23,335 

"    16.  Shaftesbury  &  Hendon  Bank.  —  Brodie  &  King.    Closed.     . 

g 

9,813 

Oct.  30,      "    17.  Shrewsb'y  &  Market  Drayton.  —  Adams  &  Warren.  Bankrupts.  . 

a 

9,700 

"            "    18.  Honiton  Bank.  —Flood  &  Lott.          .        .        .      Ditto.   . 

i 

19,015 

Nov.  6,      "    19.  Bridport  Bank.  —  Gundry  &  Co.      .        .        .         Ditto. 

5 

24,698 

Nov.  27,    "    20.  St.  Alban's  &  Herts  Bank.  —  Gibson  &  Sturt.    .  Closed.     . 

1 

2,333 

July  29,  1848  21.  Grantham  Bank.  —  Kewney  &  King  

a 

19,401 

Oct.  7,       "    22.  Sheffield  &  Retford  Bank  Closed.     . 

a 

18,744 

Total  Reduction  in  the  Circulation,  under  Act  7  and  8  Viet.  c.  32,  to  Oct.  7, 1848,     .  £416,378 

21  Private  Banking  Firms,  having  34  Banks,       .        .        .    £330,919 
6  Joint-Stock  Banking  Companies,  having  18  Banks,     .  85,459 

£416,378 

All  banks  of  issue  are  still  excluded  from  receiving  accommodation,  by 
discount  or  otherwise,  from  the  Bank  of  England.  There  seems,  how- 
ever, to  be  a  difference  of  opinion  among  the  directors  as  to  the  propriety 
of  continuing  this  exclusion.  Mr.  Morris  thinks  that  under  the  Act  of 
1844,  the  rule  may  be  relaxed  :  — 

"  Do  yon  not  refuse  discounts  to  all  banks  of  issue  ?  —  We  have  always  refused  dis- 
count accounts  to  banks  issuing  their  own  notes. 

"  Upon  what  ground1?  —  The  ground  upon  which  I  understand  it  has  been  refused 
is,  that,  previous  to  the  Act  of  1844,  the  bank  made  arrangements  with  certain  joint- 
stock  banks,  to  induce  them  to  adopt  the  Bank  of  England  circulation  ;  and  after  the 
Act  of  1844  had  been  passed,  it  was  thought  that  it  would  be  hard  not  to  continue  the 
same  facilities  to  those  banks  which  they  had  obtained  from  the  bank  befofe  the  pass- 
ing of  the  Act ;  that  arrangement  having  been  made  for  our  mutual  convenience." 

"  It  is,  however,  a  complaint,  that  you  have  a  stringent  rule,  by  which  you  refused 
discounts  or  accommodation  to  all  banks  of  issue  ?  —  I  have  no  objection  to  state, 
speaking  individually,  that  now  that  the  Act  of  1844  has  been  passed,  I  do  not  see  any 
reason  why  they  should  not  be  placed  on  the  same  footing  as  the  others ;  but  the  rea- 
son the  court  "has  not  acceded  to  that,  is  in  consequence  of  those  parties  having 

291 


A  TVeotiM  on  Banking. 

whh  as  at  a  period  when  it  was  useful  to  01  that  they  should  do  so  *    (Owi- 


But  Mr.  Cotton  entertains  different  sentiments  :  — 

*  Out  TOO  inform  the  committee  of  the  rca.«onn  why  the  Rank  of  England  refuses 
accommodation  to  paittaa  who  ii»ne  note*  !  —  There  arv,  in  my  opinion,  good  reasons 
flbr  thai  i  thow  rcaaoni  appear  in  the  following  paper,  which  1  have  di.iun  up  :  •  Isso- 

-  -  - 


la«  hs»k«,  wtw  th«  right  <>!  ili^i'<'ii'>tini:  <'•"<'  >!'  'I  t<>  tin-in,  would  krrp  -,\\\ 
fMSrvaof  their  own  note*,  of  Hank  of  England  notes,  or  coin,  pcrhnp>  nmi<-.  n-lyin- 
Ml  discounting  with  the  bank  on  every  demand,  and  moat  pi-easing  on  the  bank  when 
it  was  mUitUUi  to  tones-  —  There  are  about  300  hanks  of  issue  in  hii-hmd  and 
Wak»,  for  all  of  which  the  bank  would  hare  to  provide  gold.  —  Tin-  HHMMIIV  would 
trad  to  frustrate  one  of  the  objects  of  Act  7  and  8  Viet.  c.  32  (the  ultimate  rstuhli.<h- 
ment  of  a  single  bank  of  issue),  by  withdrawing  a  motive  to  banks  ,,r  i--n,.  to  adopt 
lUuk  of  BngTaH  circulation.  It  would  give  some  ground  of  complaint  to  those  hunk- 
en  who  bare  already  abandoned  their  circulation,  hv  placing  their  i-Miin-  competitora 
oa  a  level  with  themselves  as  to  discounting.  It  would,  as  respects  Manchester  and 
i  ,  •..:.-..•.  I1..  :v  ',.  i!i_-  n.  •  !-:ink-  •>(  i--n.-  a!  tlm*.-  pla.-i-^.  Ii  unuM  (.<• 

diatcult  ia  times  of  pressure  or  adverse  exchanges  to  control  the  discounts  ;  and  such 
contraction,  if  enforced,  would  be  obnoxious  to  such  issuing  bunks  as  had  h<-on  in  the 
habit  of  discounting.  The  banks  would  consider  thcv  Imd  ac<|iiircd  a  right  to  dis- 
counts, and  would  probably  ascribe  to  the  capricious  action  of  the  Hank  of  England 
SUIT  loascn  consequent  on  a  necessary  contraction  of  accommodation.'"  —  (Commons, 


The  Law  of  the  Currency  with  Reference  to  the  Country  Banks. 

These  are  thus  stated  in  the  article  previously  quoted,  in  the  Foreign 
and  Colonial  Review  :  — 

44  It  will  readily  occur  to  every  reader,  that  the  laws  which  regulate  the 
circulation  of  these  country  banks  must  be  different  from  those  which  reg- 
ulate the  London  circulation  of  the  Bank  of  England.  They  do  not  pay 
the  public  dividends  ;  they  cannot  issue  their  notes  in  purchasing  bullion, 
or  Government  stock,  or  Exchequer  bills,  as  all  these  operations  take 
place  in  London,  where  their  notes  do  not  circulate.  They  are  also  sub- 
ject  to  certain  restrictive  laws  to  which  the  notes  of  the  Bank  of  England 
are  not  subject  Their  notes  are  not  only  legally  payable  on  demand, 
but  payment  is  constantly  demanded  ;  while  no  one  demands  payment  of 
a  Bank  of  England  note,  unless  he  has  occasion  to  export  the  gold. 
There  is  also  a  system  of  exchanges  between  country  bankers,  by  which 
all  notes  that  are  paid  into  any  of  the  banks  are  immediately  brought  back 
for  payment  to  the  banks  that  issued  them.  It  is  the  practice,  too, 
throughout  the  country,  to  allow  interest  on  deposits  ;  and  thus  all  notes 
not  required  for  the  actual  wants  of  the  community  are  promptly  with- 
drawn from  circulation,  and  lodged  with  a  bank  upon  inter 

**  On  inspecting  the  monthly  returns  of  the  country  circulation  for  the 
but  ten  years,  we  find  that  the  highest  amount  is  in  the  month  of  April  ; 
thence  it  descends,  and  arrives  at  the  lowest  point  by  the  end  of  August, 
which  is  the  lowest  point  in  the  year.  It  gradually  increases  to  Novem- 
ber ;  a  slight  reaction  takes  place  in  December  ;  but  it  then  advances, 
until  it  reaches  the  highest  point  in  April.  The  general  law  is,  that  the 
country  circulation  always  makes  one  circuit  in  the  year  ;  being  at  its 
lowest  point  in  August,  and  advancing  to  December,  and  continuing  to 

Ml 


Country  Private  Banks. 


advance  to  its  highest  point  to  the  month  of  April,  and  then  again  de- 
scending to  its  lowest  point  in  August. 

"  The  laws  which  regulate  the  circulation  of  the  country  banks  are  de- 
rived from  the  state  of  trade  in  the  respective  districts  in  which  the  banks 
are  established.  As  these  banks  are  chiefly  located  in  agricultural  dis- 
tricts, the  operations  of  agriculture  have  a  very  considerable  influence  in 
their  regulation.  Hence  the  advance  in  the  spring,  and  the  advance 
again  after  August,  in  consequence  of  the  harvest.  It  is  clear  that  the 
laws  must  be  uniform  in  their  operation,  because  the  fluctuations  of  circu- 
lation in  each  year  are  uniform,  and  constantly  recur  with  the  return  of 
the  season.  The  slight  reaction  in  December  is  probably  occasioned  by 
the  collection  of  the  public  revenues  and  of  landlords'  rents  in  the  coun- 
try districts,  and  the  general  dulness  of  trade  in  that  month. 

"  It  may  also  be  observed,  that  the  issues  of  the  joint-stock  banks,  and 
of  the  private  banks,  are  subject  to  the  same  laws.  The  issues  of  both 
classes  of  banks  rise  together  and  fall  together,  and  they  have  maintained 
nearly  the  same  relative  amount  during  the  last  seven  years. 

"  The  laws  which  regulate  the  annual  fluctuations  of  the  country  circu- 
lation, that  is,  which  determine  the  variations  in  the  amounts  of  the  coun- 
try circulation,  not  within  the  year,  but  taking  corresponding  periods  of 
different  years,  are  also  dependent  on  the  state  of  trade  in  those  years. 
If  there  be  an  increase  of  trade  without  an  increase  of  prices,  more  notes 
will  be  required  to  circulate  the  increased  quantity  of  commodities.  If 
there  be  an  increase  of  commodities,  and  also  an  advance  of  prices,  a 
still  larger  amount  of  notes  would  be  required.  There  are  also  other  cir- 
cumstances that  may  permanently  affect  the  amount  of  the  country  circu- 
lation. 

"  During  the  last  five  years  there  has  been  a  gradual  reduction  in  the 
annual  amount  of  the  country  circulation,  as  appears  from  the  following 
Table,  which  shows  the  average  amount  in  each  year,  from  1839  to 
1843,  both  inclusive  :  — 


1839,  ....    £11,715,527 

1840,  ....  10,457,057 

1841,  ....          9,671,643 


1842, 
1843, 


£  8,249,052 
7.667,916 


"  We  attribute  this  extensive  reduction  in  the  country  circulation  to  the 
following  causes: — First,  The  great  dulness  of  trade  which  has  taken 
place  in  every  part  of  the  country.  Secondly,  The  fall  in  the  price  of 
corn  in  connection  with  bad  harvests.  Thirdly,  The  introduction  of  the 
penny  postage,  and  the  system  of  registered  letters.  The  uniform  penny 
post  was  commenced  on  the  10th  of  January,  1840,  and  the  registry  of 
letters  on  the  6th  of  January,  1841.  In  consequence  of  these  arrange- 
ments, every  banker  sends  off  every  night,  either  to  London  or  elsewhere, 
for  payment,  all  the  notes  of  other  banks  he  may  have  received  during 
the  day,  excepting  those  issued  in  the  same  town.  This  must  have  occa- 
sioned a  large  reduction  in  the  amounts  returned  as  notes  in  circulation. 
The  amount  in  the  hands  of  the  public  is  the  same,  but  the  amount  in  the 
hands  of  other  bankers  is  considerably  reduced.  Fourthly,  The  practice 
of  keeping  banking  accounts  has  extended  very  much  of  late  years.  In- 
Y*  293 


A  TrealUe  on  Banking. 


of  carrying  note*  in  their  pockets  as  formerly,  people  now  lodge 
the  notes  with  their  banker,  and  make  thuir  payment*  by  giving  cheques 
OQ  the  bank.  Tito  facilities  of  travelling  by  mil  ways  and  otliur  means 
have  abio  tended  to  diminish  the  amount  of  notes  in  eireulution,  and  to 
cause  them  to  be  returned  more  rapidly  for  payment  to  the  bankers. 
Fifthly,  the  circulation  of  the  private  bankers  has  been  reduced  by  fail- 
ures, and  by  merges  into  joint-stock  bunks ;  and,  on  the  other  hand,  sever- 
al joint-stock  banks  have  withdrawn  tlicir  own  notes,  and  made  arrange- 
roonts  for  issuing  the  notes  of  the  Bank  of  England." 

It  will  be  seen  by  the  following  Table,  that  the  country  circulation  is 
governed  by  the  same  laws  since  the  passing  of  the  Act  of  1844  :  — 


of  lit  average  Circulation  of  the  Private  and  Joint-Stock  Bant*  of  lime, 
dtnma  (fa  latt  II  Wt  IN  0*  Montht  oj  April,  Auyutt,  and  December,  for  the  Yean  1845, 


PKIVAT*  BANK*. 


JOINT-STOCK  BANK*. 


DM*.   No.of  Bmnk*. 


1§45. 
April  M 

A  •     H 
Dec.  17 


April  25 
lam  n 

\  •      M 

1847. 

April  24 

A  1     M 

Da     • 

1848. 
April  29 

A',  :•;-, 

Dec.  90 


1  » 
199 
197 

197 
197 
196 

196 
196 
187 

187 
187 
184 


Authoriiod 

1»NM. 

£ 

5,011,097 
5,011,097 
5,009,021 

Actual 
Circulation. 

£ 
4,655,636 
4.369,458 
4,481,038 

5,009.021 

5,009.021 
4,999,444 

4,700,170 
4,384,136 
4,528,208 

4,999,444 
4.999,444 
4,880,389 

4,700,169 
4,150,688 
3,525,157 

4,880,389 
4,880,389 
4,822,488 

8,919,739 
3,473,839 
3,492,340 

No.  of  Bank.. 

71 
71 
70 

70 
70 
67 

67 
67 
65 

67 
67 
66 


£ 

:t.477,:i-Jl 
3,477,321 


3.469,872 

:i.  Jf.'.i.  -72 
3,418,277 

3,418,277 
3,418,277 
3,261,906 

3,409,987 

:un'.t.'.i-7 
3,409,987 


Actual 
Circulation. 

£ 

34172,034 
3,129,952 
3,160,010 

3,229,744 

:t  u.-,.:o-j 
3,228,717 
2,417,528 

2,834,799 
2,455,664 
2,529,498 


From  the  pressure  in  the  year  1847,  the  country  circulation  in  Decem- 
ber was  less  than  in  August.  Will  they  who  contend  that  country  bank- 
ers can  extend  their  issues  as  they  please,  have  the  kindness  to  inform  us 
why  those  bankers  did  not  increase  their  issues  when  money  was  so  val- 
uable ? 

1  cannot  better  state  my  own  views  of  the  principles  of  the  country 
circulation,  than  by  transcribing  a  portion  of  my  evidence  given  before 
the  Committee  on  Banks  of  Issue,  in  March,  1841,  when  examined  by 
fir  Robert  Peel:  — 

u  Sir  Robert  Peel.  —  Would  you  recommend  that  the  paper  thus  is- 
sued  should  be  convertible  into  gold  at  the  will  of  the  holder  ?  —  Yes. 

**  You  think  that  is  an  absolutely  necessary  check  against  excessive 
issues  ?  —  1  think  U  is  a  necessary  check. 

**  What  reference  is  made  in  the  issue  of  paper  to  the  quantity  of  gold 
in  the  country,  and  to  the  ultimate  ability  of  the  parties  to  discharge  their 
paper  engagements  in  gold  ?  —  The  bankers  in  issuing  their  notes  do  not 
make  any  reference  to  the  quantity  of  gold  in  the  country,  but  they  make 

" 


Country  Private  Banks. 

reference  to  their  ability  to  discharge  those  notes  when  returned  to  them 
for  payment. 

"  What  is  the  nature  of  the  reference  which  they  make  ?  —  By  keep- 
ing securities  available  for  the  purpose  of  being  sold  in  order  to  discharge 
those  notes  whenever  presented  to  them  for  payment. 

"  They  have  no  reference  whatever  to  the  state  of  the  exchanges  ?  — 
No ;  when  I  say  no,  I  mean  not  with  the  view  of  regulating  the  amount 
of  notes  by  the  exchanges  ;  but  bankers,  whether  banks  of  issue  or  not,  no- 
tice the  exchanges  as  naturally  as  they  would  notice  the  prices  of  the  funds, 
in  order  that  they  may  be  able  to  judge  as  to  the  future  value  of  money, 
so  as  to  exercise  their  discretion  with  reference  to  their  investments. 

"  They  do  not  notice  the  state  of  the  exchanges  with  a  view  to  deter- 
mine the  policy  of  contracting  or  increasing  their  issues  ?  —  No  ;  not 
with  a  view  of  making  the  amount  of  their  issues  correspond.  If  they 
see  that  the  exchange  is  likely  to  become  unfavorable,  bankers  will  natu- 
rally be  more  cautious  in  making  advances,  and  more  cautious  of  com- 
ing under  engagements,  than  they  would  be  when  they  found  that  the  ex- 
changes were  favorable  ;  but  there  is  no  intention  on  the  part  of  the  coun- 
try banks  to  make  their  notes  correspond  with  the  amount  of  the  bullion 
in  the  Bank  of  England. 

"  A  country  banker  would  rely  upon  the  sale  of  his  securities,  and 
that  only  in  case  of  a  demand  for  gold  ?  —  In  case  of  a  general  run,  he 
would  depend  upon  the  stock  he  had  in  hand,  and  the  further  stock  he 
might  realize  by  a  sale  of  securities. 

"  If  all  parties  continued  to  issue,  none  of  them  having  reference  to 
the  state  of  the  exchanges,  but  relying  upon  the  available  resources  which 
a  sale  of  securities  might  supply,  do  not  you  think  that  there  might  be  a 
danger  of  a  sudden  demand  for  gold,  and  of  an  inability  on  the  part  of 
those  issuers  to  discharge  their  engagements  in  gold  ?  —  I  do  not  think 
there  would  be  any  danger  of  that  at  all,  because  each  bank  would  take 
care  of  itself;  if  you  suppose  that  the  whole  circulation  of  the  country 
comes  in  at  once  and  demands  gold,  it  is  quite  clear  that  gold  cannot  be 
found  to  pay  it  off,  and  that  is  equally  the  case  with  the  Bank  of  England 
and  any  other  bank,  and  it  is  equally  the  case  with  us  who  are  banks  of 
deposits  ;  if  all  the  depositors  were  to  come  together  at  the  same  time 
and  require  their  deposits,  we  should  be  unable  to  pay  them,  but  we 
could  realize  our  securities,  and  pay  them  off,  if  they  were  to  come 
gradually. 

"  Suppose  there  was  one  bank  which  had  the  charge  of  the  paper  cir- 
culation of  the  country,  and  had  the  means,  therefore,  by  constant  refer- 
ence to  the  state  of  the  exchanges,  of  determining  the  amount  of  the  pa- 
per circulation,  do  not  you  think  that  there  would  be  a  greater  security 
against  a  sudden  demand  for  gold,  and  an  inability  to  pay  that  gold,  than 
there  is  when  there  are  a  great  many  issuers,  none  of  whom,  according 
to  your  own  statement,  pay  the  slightest  regard  to  the  state  of  the  exchan- 
ges ?  —  No,  I  think  not. 

"  What  then  supplies  the  check  ?  — The  check  upon  the  private  bank- 
ers is,  that  their  circulation  cannot  be  issued  to  excess ;  whereas,  if  you 
had  a  bank  which  should  issue  notes  for  so  much  gold,  then  every  time 

295 


A   Treat  he  on  Banking. 

was  a  favorable  coone  of  exchange,  there  would  be  a  large  issue 
of  note*,  which  note*  would  necessarily  n-duce  the  rate  of  interest,  lead 
to  speculation,  and  turn  the  exchange*  again  by  causing  investments  to  be 
•MM  in  foreign  countrica.  Now,  as  issues  are  at  present  conducted, 
banker*  are  under  several  checks  which  would  not  apply  to  such  a  bunk  ; 
for  instance,  the  check  of  the  interchange  with  each  other  of  ih-  ir  ililli  r- 
ent  note*  ooce  or  twice  a  week,  and  the  check  of  having  their  notes  pay- 
able  on  demand ;  whereas  the  notes  of  such  a  bank  as  you  suppose  would 
not  be  diminished  except  when  gold  was  wanted  to  be  sent  abroad. 
Another  check  is  the  practice  of  giving  interest  upon  deposits,  by  which 
all  the  surplus  circulation  is  called  in  and  lodged  with  the  banks;  M<>\\, 
such  a  bank  as  you  have  supposed  would  not  be  under  tin-  control  of 
those  check*,  and  it  would  be  under  the  necessity  of  increasing  the  cir- 
culation whenever  the  exchange  became  favorable ;  and  we  know  by  ex- 

•  the  mosl  Bun  w:iy  «\'  ni.ikinu'  til''  'Ai-liiiiiu"^  uiil'iv.nii,!.-  is 

a  previous  excessive  issue ;  that  previous  excessive  issue  would  nec*essari- 
ly  arise,  on  the  principle  you  have  supposed,  every  time  the  exchange  was 
favorable. 

**  You  think  that  there  is  some  cause  in  operation  which  applies  equally 
to  all  issuers  of  paper,  and  prevents  any  undue  issue  of  paper,  and  dis- 
pense* with  the  necessity  of  any  reference,  on  the  part  of  each  issuer,  to 
the  state  of  the  exchanges  ?  —  That  is  the  case  with  all  country  issuers  of 
paper.  With  regard  to  the  Bank  of  England,  who  have  the  power  of  is- 
suing their  notes  in  exchange  against  bullion,  in  the  purchase  of  Exch 
uer  bills  and  Government  stock,  it  is  quite  clear  that  notes  put  into  ope 
tion  in  that  way,  being  thrown  in  a  mass  upon  the  previously  existing 
state  of  trade,  will  have  the  effect  of  raising  prices  and  reducing  interest, 
and  turn  the  exchanges  ;  but  if  notes  are  issued  merely  to  pay  for  trans- 
actions that  have  previously  taken  place,  and  are  drawn  out  by  the  oper- 
ations of  trade,  those  notes  will  have  no  such  effect. 

"  Supposing,  at  present,  the  Bank  of  England  observed  that  the  ex- 
changes continued  unfavorable  for  a  long  period, -and  that  there  was  a 
progressive  diminution  in  the  amount  of  their  bullion,  and  supposing  that 
they  saw  that  in  the  course  of  two  years  their  bullion  was  reduced  from 
ten  millions  to  four  millions  ;  do  you  think  it  would  be  desirable  that  the 
Dank  of  England  should  take  any  step  whatever  to  guard  against  the  ul- 
timate consequence*  of  that  state  of  things,  by  restricting  tlie  paper  cir- 
culation ?  —  I  think  such  a  case  may  occur,  but  I  think  in  ordinary  times 
the  Bank  of  England  might  hold  foreign  securities,  by  which  they  would 
bring  back  gold  to  this  country,  and  thus  prevent  any  necessity  for  a  con- 
traction of  the  circulation ;  at  the  same  time,  I  do  not  at  all  question  the 
possibility  of  such  a  case  occurring  as  may  render  a  contraction  necessa- 
ry ;  nor  do  I  at  all  question  the  influence  of  a  contraction  to  have  some 
effect  upon  the  exchanges ;  but  I  contend  that,  as  an  ordinary  principle 
of  action,  the  bank  ought  not  to  expand  their  circulation,  so  as  to  cause 
the  exchange*  to  be  unfavorable,  nor  calculate  upon  a  contraction  of  the 
ctrcalauon  for  the  purpose  of  remedying  the  exchanges. 

44  Then  you  do  think  that  the  expansion  of  the  circulation  of  the  Bonk 
of  England  may  cause  unfavorable  exchanges  ?  — Yes. 

M6 


Country  Private  Banks. 

"  Why  should  not  the  expansion  of  the  circulation  on  the  part  of  the 
country  issuers  produce  the  same  effect  ?  — Because  the  country  circula- 
tion is  under  checks,  whereas  the  Bank  of  England  circulation  is  not ;  the 
country  circulation  can  be  issued  only  in  consequence  of  transactions 
which  have  taken  place,  and  to  the  extent  only  required  by  the  wants 
of  the  district ;  whereas  it  is  obvious  that  the  Bank  of  England  has  the 
power  of  increasing  the  circulation  by  the  purchase  of  exchequer  bills 
or  stock,  or  by  purchasing  bullion,  and  throwing  a  mass  of  notes  on  the 
market  when  the  state  of  trade  does  not  require  them." 

Chairman.  —  "  Have  you  any  further  observations  to  make  to  the  com- 
mittee ?  —  When  the  first  question  was  asked  of  me,  at  the  commence- 
ment of  my  examination,  I  stated  that  I  appeared  before  the  committee 
as  the  representative  of  the  joint-stock  banks,  and  that,  therefore,  in  ex- 
pressing any  opinions  consistently  with  the  resolutions  which  they  had 
passed,  I  wished  to  be  considered  as  speaking  the  sentiments  of  the  joint- 
stock  banks,  but,  should  the  committee  ask  me  any  question  not  connect- 
ed with  the  circumstances  of  country  issues,  that  I  wished  to  be  consid- 
ered as  speaking  my  own  individual  opinions.  The  points  upon  which  I 
wish  to  be  considered  as  speaking  the  sentiments  of  the  joint-stock  banks 
are  as  follows :  I  speak  the  opinions  of  the  joint-stock  banks,  in  saying 
that  their  circulation  cannot  be  made  to  fluctuate  in  exact  conformity  with 
the  circulation  of  the  Bank  of  England,  or  with  the  stock  of  gold  in  the 
Bank  of  England  ;  that  the  country  issue  is  drawn  out  by  the  demands 
of  trade,  and  is  subject  to  checks  to  which  the  circulation  of  the  Bank  of 
England  is  not  liable  ;  that  the  country  bankers  have  not  the  power  of  is- 
suing their  notes  to  excess  ;  that  they  cannot  contract  their  circulation  or 
expand  it  as  they  please ;  and  also,  that  the  country  circulation  does  not 
influence  the  prices  of  commodities,  and  that  it  cannot  be  regulated  by 
the  principles  of  the  foreign  exchange.  I  speak  the  opinions  of  the  joint- 
stock  banks  when  I  say  that  the  abolition  of  the  country  circulation  would 
cause  very  considerable  distress ;  would  limit  the  power  of  the  country 
banks  to  grant  the  same  accommodation  to  their  customers ;  would  com- 
pel many  of  their  customers  to  sell  their  property,  thus  lessening  the  val- 
ue of  real  property  ;  that  country  bankers  would  be  compelled  to  increase 
their  charges  to  their  customers  ;  and,  in  some  cases,  that  those  banking 
establishments  would  be  altogether  abolished,  in  consequence  of  not  be- 
ing able  to  supply  sufficient  profit  for  carrying  them  on ;  that,  in  some 
other  cases,  however  the  country  circulation  would  be  substituted  or  super- 
seded by  a  bill  circulation,  nevertheless  considerable  distress  would  exist 
throughout  the  country,  and  that  not  only  country  banks  themselves,  but 
their  customers  and  the  public  in  general,  would  be  subject  to  very  con- 
siderable loss  and  inconvenience.  In  other  opinions  which  I  have  ex- 
pressed with  regard  to  the  regulation  of  the  currency,  and  the  principles 
upon  which  the  Bank  of  England  ought  to  be  managed,  also,  as  regards 
the  extracts  which  have  been  made  from  my  own  works,  and  other  mat- 
ters I  need  not  particularly  specify,  I  wish  to  be  understood  as  giving  my 
own  opinions,  without  saying  whether  those  opinions  do  or  do  not  meet 
the  concurrence  of  the  joint-stock  bankers.  I  take  the  responsibility  of 
these  entirely  upon  myself." 

297 


A  Treatbe  o*  Banking. 

The  country  bankers  residing  in  the  same  neighbourhood  usually  make 
their  exchange*  onc«  a  week,  and  pay  the  difference  in  I*>nil..ii  on  the 
following  day.  This  arrangement  is  of  eonsiderahle  advantage  to  all  par- 
lie*.  Suppose  I  as  a  country  banker  receive  in  the  course  of  n  week  the 
•urn  of  £  10,000  in  the  note*  of  a  neighbouring  bank,  and  that  hank  re- 
ceives the  same  amount  of  my  notes  ;  if  we  exchange  notes,  there  in  an 
end  of  the  trnn-wtion.  I  pay  the  notes  that  hank  lias  upon  me  by  the 
notes  I  hare  upon  that  bank,  and  each  of  us  has  £  10,000  lew  in  circula- 
tion. But  suppose  we  refuse  to  exchange  notes  with  each  other,  thru  1 
take  his  notes  and  demand  Bank  of  England  notes  and  sovereigns,  and 
he  does  the  tamo  with  in--.  llenee  each  of  us  must  keep  a  balance  of 
£  10,000  more  in  gold  or  Bank  of  England  notes,  and  also  an  additional 
sum  to  aaiwer  any  sudden  emergency  that  may  arise  at  any  time  from 
that  banker  hating  more  than  the  usual  amount  of  notes,  and  to  meet  any 
run  that  he  nmfbe  disposed  to  make  upon  me.  Thus  it  is  that  country 
banks,  by  exchanging  notes,  and  receiving  payment  of  the  difference  in 
London,  are  enabled  to  carry  on  their  business  with  a  less  amount  of 
ready  cash,  and  to  prevent  the  danger  that  might  arise  from  being  run 
upon  by  each  other.  Those  banks  only  exchange  which  are  in  the  same 
neighbourhood.  Were  I  to  receive  the  notes  of  a  bank  at  some  distance 
off,  I  should  send  these  notes  to  London,  and  that  banker  would  send  my 
notes  to  London,  and  they  would  be  paid  by  our  London  agents.  We 
should  not  exchange  with  each  other,  because  it  would  cost  more  to  send 
•  messenger  with  the  notes  to  be  exchanged,  than  it  would  cost  postage  ML 
London.  Here  I  have  to  pay  the  postage  of  these  notes  to  London,  ansr 
I  have  also  to  pay  the  expense  of  having  my  notes  which  have  been  paid 
in  London  sent  down  to  me. 

The  exchange  between  any  two  banks  established  in  the  same  place, 
will  be  regulated  by  the  character  and  extent  of  the  business  they  may 
respectively  carry  on.  The  balance  may  for  a  considerable  length  of 
time  be  uniformly  in  favor  of  one  of  these?  Ifecks,  and  then  for  a  consider- 
able period  in  favor  of  the  other  ;  or  it  may  fluctuate  weekly,  and  at  the 
year's  end  be  found  to  be  neither  favorable  nor  unfavorable.  I  shall  en- 
deavour to  investigate  the  causes  which  govern  these  changes.  In  the 
first  place,  I  shall  presume  that  each  bank  is  a  bank  of  deposit,  of  discount, 
of  remittance,  of  agency,  and  of  circulation.  The  claims  upon  each  bank 
will  then  consist  of,  —  1.  Cheques  drawn  against  deposit  accounts.  2.  Its 
own  notes.  3.  Notes  issued  by  its  agents  or  other  branches.  4.  Letters 
of  credit  granted  by  agents  or  branches.  These  claims  or  obligations  will 
get  into  the  possession  of  the  rival  bank  by  some  of  the  following  ways  : 
—  1.  As  lodgments  on  deposit  accounts.  2.  In  payment  of  local  bills. 
3.  For  bills  or  letters  of  credit  on  agents  or  branches.  4.  Received  for 
collection  by  post  from  some  agents  or  branches.  The  exchanges  will 
now  be  more  or  less  favorable  according  to  the  following  circum- 


1    The  discounting  of  bills  not  payable  in  the  place  where  the  banks 
are  established,  has  a  tendency  to  render  the  exchanges  unfavorable. 
If,  for  example,  a  country  banker  discounts  bills  payable  in  London,  he 
his  own  notes  for  the  amount  at  the  time  the  bill  is  discounted,  and 
9M 


Country  Private  Banks. 

some  of  these  notes  will  get  into  the  rival  bank  and  render  the  exchanges 
unfavorable.  When  the  bills  are  due,  the  London  agent  receives  the 
amount  from  the  accepters  ;  but  this  has  no  effect  on  the  local  exchange. 
Hence  a  bank  that  discounts  a  large  amount  of  London  bills  must  expect 
to  have  large  sums  to  pay  in  the  exchanges.  There  are  some  cases, 
however,  in  which  the  discounting  of  London  bills  will  not  affect  the  local 
exchange  :  these  are, —  1.  When  the  amount  of  the  bill  is  not  taken  in 
notes,  but  in  a  draft  on  the  London  or  some  other  agents.  2.  When  the 
amount  of  the  bill  is  placed  to  the  party's  current  account,  the  exchanges 
will  not  be  affected  so  long  as  it  remains  on  that  account.  3.  The  ex- 
changes will  not  be  affected,  if  the  notes  issued  for  the  London  bill  should 
be  retired  either  by  the  bank  that  issued  them,  or  by  any  of  its  agents. 

2.  If  a  bank  has  to  pay  a  large  amount,  or  letters  of  credit,  issued  upon 
it  by  its  agents  or  branches,  the  exchanges  may  become  unfavorable. 

The  exchange  between  any  two  banks  may  be  affected  by  other  cir- 
cumstances than  local  connections.  If  one  bank  is  drawn  upon  by  agents 
or  branches,  or  has  to  pay  notes  issued  by  agents  or  branches,  and  the 
other  has  no  such  connections,  then  the  exchange  will  be  unfavorable  to 
the  former  bank  and  favorable  to  the  latter.  Some  of  these  notes  or  let- 
ters of  credit,  and  some  of  the  notes  issued  for  the  letters  of  credit,  will 
probably  get  into  the  possession  of  the  rival  bank,  and  appear  in  the  ex- 
change. 

3.  If  a  bank  issues  a  large  amount  of  bills,  or  letters  of  credit  upon  its 
agents  or  branches,  the  tendency  is  to  render  the  exchange  favorable.       * 

The  bank  receives  the  money  for  these  bills  or  letters  at  the  time  it 
issues  them.  This  money  will  often  be  composed  of  the  notes  chiefly  in 
circulation,  and  a  part  of  them  will  consist  of  the  notes  or  obligations  of 
the  rival  bank,  and  will  be  paid  in  the  exchange  :  or  if  the  bank  receive 
from  its  agents  or  branches  any  claims  upon  the  rival  bank,  or  even  any 
bills  to  be  collected,  the  effect  will  be  to  render  the  exchange  favorable  in 
the  same  way  as  the  granting  letters  of  credit  upon  those  agents  or 
branches. 

4.  The  increase  of  lodgments  on  current  accounts  has  a  tendency  to 
render  the  exchanges  favorable. 

On  these  accounts  money  is  received  and  money  is  paid  out  daily. 
The  receipts  of  money  tend  to  throw  the  exchange  in  favor  of  a  bank,  be- 
cause some  portion  of  these  receipts  will  consist  of  the  obligations  of  the 
rival  bank.  The  payment  of  money  tends  to  render  the  exchange  unfa- 
vorable, because  some  of  the  notes  issued  in  payment  will  find  their  way 
into  the  other  bank.  When  therefore  the  receipts  are  more  in  amount 
than  the  payments,  the  exchanges  are  likely  to  be  favorable.  When  the 
total  deposits  lodged  in  a  bank  continue  to  increase,  the  exchange  will 
probably  be  favorable  during  the  progress  of  such  increase  ;  but  after  the 
deposits  have  ceased  to  increase,  the  exchange  will  not  be  more  favorable 
than  before  the  increase  began.  As  long  as  the  amounts  of  the  deposits 
in  the  respective  banks  remain  stationary,  the  operations  on  those  ac- 
counts will  not  affect  the  exchanges,  although  the  deposits  in  one  bank 
may  be  twice  the  amount  of  those  in  the  other.  But  if  from  a  transfer  of 
accounts  or  from  other  causes  the  deposits  increase  in  one  bank  and  di- 

299 


A  Trealite  on  Banking. 

minish  in  the  other,  the  exchange*  during  these  operations  will  bo  in  favor 
>f  the  bank  whose  deposits  are  on 'the  increase.  But  lot  the  progress  of 
increase  be  over,  and  the  amounts  of  the  respective  lodgments  become 
permanently  fixed,  then  as  far  as  the  operations  on  the  current  accounts 
an  concerned  the  exchanges  will  again  be  equal. 

5.  An  increase  in  the  amount  of  local  bills  under  discount  has  a  ten- 
dency to  render  the  exchanges  unfavorable.  Local  bills  are  bills  payable 
in  the  place  where  the  bank  is  established.  The  operations  on  the  local 
bill  nmniu*  are  similar  to  those  on  the  deposit  account  When  these  bills 
are  discounted,  note*  are  issued,  —  when  the  bills  are  paid,  totes  are  re- 
ceived. When  the  amount  of  local  bills  paid  is  greater  than  that  dis- 
counted, the  tendency  is  to  render  the  exchanges  favorable.  Thus,  to  re- 
duce the  amount  of  local  bills  under  discount,  is  to  render  the  exchanges  . 
favorable ;  and  to  increase  the  amount,  is  to  render  them  the  reverse. 
But  though  the  pperations  on  the  local  bill  account  are  similar  in  their 
nature  to  those  On  the  current  accounts,  yet  the  effect  is  different  «s  to 
their  influence  on  the  exchanges.  For  as  the  amount  of  the  local  bills 
under  discount  increases,  the  exchanges  become  unfavorable :  but  as  the 
deposits  increase,  the  exchanges  become  advantageous.  In  the  increase 
of  local  bills,  the  issue  of  notes  will  be  more  than  the  receipts  ;  but  in  the 
increase  of  the  deposits,  the  receipts  will  be  more  than  the  issues. 

As  the  laws  of  the  country  circulation  are  the  same,  whether  the  notes 
are  issued  by  private  or  by  joint-stock  banks,  I  have  introduced  the  subject 
into  this  section  on  the  Private  Country  Hanks,  and  have  altogether  omit-. 
ted  it  in  the  following  section  on  the  Country  Joint-Stock  Bonks. 


SECTION  V.  — COUNTRY  JOINT-STOCK  BANKS. 

BT  a  clause  in  the  charter  of  the  Rank  of  England,  no  partnership 
formed  for  carrying  on  the  business  of  banking  could  consist  of  more 
than  six  persons,  but  by  an  Act  passed  in  the  year  1826,  copartnerships 
of  more  than  six  in  number  are  permitted  to  carry  on  business  as  bankers 
in  England,  sixty-fire  miles  from  London,  provided  they  have  no  house 
of  business  or  establishment  as  bankers  in  London,  and  that  every  mem- 
ber of  such  copartnership  shall  be  responsible  for  all  the  debts  of  the 
company.  They  must  also  deliver  to  the  Stamp-office  the  names  and 
•laces  of  abode  of  all  their  members,  and  also  a  list  of  their  officers. 
These  lists  are  to  be  copied  into  a  book,  which  any  person  is  entitled  to 
see  on  paying  one  shilling,  and  to  obtain  a  copy  for  ten  shillings.  The 
banks  may  sue  and  be  sued  in  the  name  of  their  public  officer,  and  exe- 
•n  upon  judgment  may  be  issued  against  any  member  of  the  copart- 
nership. 

We  take  the  following  account  of  these  banks  from  a  Report  of  a  Com- 
mittee of  the  House  of  Commons,  appointed  in  the  year  1830  to  inquire 
into  the  operation  of  the  Act  7  Geo.  IV.  c.  46,  for  permitting  the  estab- 
of  Joint-Stock  Bank.:  — 

no 


Country  Joint-Stock  Banks. 

"The  evidence  taken  before  your  committee,  and  the  returns  from  the  Stamp-office, 
establish  the  fact  that  these  banks  are  rapidly  extending  in  all  directions ;  that  new 
companies  are  daily  forming,  and  that  an  increased  number  of  branches  and  agencies 
are  spreading  throughout  England,  even  in  small  towns  and  villages  ;  that  a  principle 
of  competition  exists,  which  leads  to  the  extinction  of  all  private  banks,  and  to  their 
conversion  into  banking  companies.  The  mode  in  which  this  is  effected,  and  the  prin- 
ciple on  which  the  issue  of  transferable  shares  acts  at  once  on  private  banks,  and  gen- 
erally on  commercial  credit,  is  fully  developed  in  the  evidence. 

"  Your  committee  have  had  before  them  the  deeds  of  settlement  of  the  greater  num- 
ber of  the  existing  joint-stock  banks,  and  they  proceed  to  submit  to  the  House  an 
analysis  of  some  of  their  leading  provisions. 

"  Though  the  general  objects  of  these  establishments  are  much  alike,  yet  there 
are  some  variations  in  their  deeds  of  settlement  which  it  may  be  material  to  point 
out. 

"  First,  as  to  the  power  of  altering  the  regulations  of  the  company. 

"  The  active  duties  are  generally  delegated  to  a  small  body  called  the  directors, 
while  the  main  body  of  proprietors  reserve  to  themselves  the  power  of  selecting  tbe  di- 
rectors, and  of  altering  from  time  to  time  the  rules  by  which  the  directors  are  to  be 
governed.  Indeed,  it  might  have  been  expected  that  the  proprietors  would  always 
have  reserved  to  themselves  this  power ;  nor  should  this  general  rule  have  been  no- 
ticed, had  it  not  been  necessary  to  point  out  a  single  exception  to  it,  in  the  case  of  one 
particular  company,  in  which  all  the  powers  of  the  company  are  vested  in  the  directors 
of  the  central  bank,  till  January,  1838,  and  even  after  that  date  this  authority  is  only  to 
be  controlled  by  the  '  general  board  of  directors,'  consisting  of  the  central  directors 
themselves,  and  of  the  local  directors  of  branch  banks,  appointed  by  them.  The  deeds 
of  all  the  other  companies  expressly  give  a  power  to  the  shareholders  to  make  new 
laws  and  regulations. 

"  Secondly,  as  to  the  mode  of  conducting  the  business  of  banking. 

"This  is  for  the  most  part  set  out  in  general  terms.  Some  banking  companies  con- 
tent themselves  with  defining  the  business  to  be  'banking  in  all  its  branches' ;  in  other 
cases,  it  is  called  '  the  business  of  bankers.' 

"  Ad  vancing*  money  on  real  security  is  in  no  instance  forbidden.  The  deeds  of  three 
companies  are  silent  on  the  subject ;  the  rest  expressly  allow  it. 

"  The  majority  of  the  deeds  are  silent  on  the  subject  of  the  purchase  of  land.  The 

. Banking  Company  expressly  allows  it.  The Banking 

Company  and  the  Union  Banking  Company  expressly  forbid  it. 

"  An  advance  of  money  on  mining  concerns  is  in  no  instance  expressly  allowed  ;  in 
many  it  is  expressly  forbidden ;  in  the  majority,  it  is  passed  over  in  silence. 

"  Advances  of  money  upon  any  '  public  foreign  government  stock,  or  the  stock  of 
any  foreign  chartered  public  company.'  is  directly  sanctioned  in  the  deeds  of  four 
banking  companies.  Investment  in  foreign  government  stock  or  funds  is  allowed  by 
the  deed  of  another  bank.  Such  advances  are  expressly  forbidden  by  many  of  the 
deeds,  and  are  passed  over  in  silence  by  many  others. 

"  In  no  instance  is  the  company  forbidden  to  become  the  purchaser  of  its  own 
shares ;  but,  on  the  contrary,  power  is  expressly  given  to  do  so  by  means  of  the  deeds, 
and  that  to  any  amount.  The  only  modifications  of  this  power  which  your  committee 
have  found  are  in  the  case  of  one  banking  company,  in  which  the  directors  are  au- 
thorized to  purchase  shares  in  the  case  only  of  a  refusal  to  admit  as  a  proprietor  the 
person  proposing  to  buy ;  and  in  the  case  of  another  bank,  the  number  of  shares  to 
be  bought  in  by  the  directors  is  restricted  to  forty. 

"  Thirdly,  as  to  the  degree  of  publicity  to  be  given  to  the  proceedings. 

"  No  principle  seems  to  be  move  attended  to,  or  prominently  put  forward,  than  that 
of  preserving  secrecy  as  to  the  state  of  the  accounts  of  the  customers  of  the  banks. 
To  this  principle  there  does  not  appear  to  be  an  exception. 

"  The  directors  are  in  general  required  to  sign  a  declaration  pledging  themselves  to 
observe  secrecy  as  to  the  transactions  of  the  bank  with  their  customers,  and  the  state 
of  the  accounts  of  individuals.  In  some  of  the  companies,  this  declaration  is  also  to 
be  signed  by  all  the  clerks  and  officers.  One  banking  company  goes  so  far  as  to  re- 
quire an  oath  to  this  effect.  If  the  proprietors  are  dissatisfied  with  the  statement  of 
accounts  made  by  the  directors,  a  power  is  generally  reserved  to  appoint  auditors  or 
inspectors  for  the  examination  of  the  books ;  but  these  auditors  or  inspectors  are  re- 
quired to  sign  a  similar  declaration  of  secrecy. 

z  301 


A  TrtattM  on  Banking. 
"  No  proprietor,  not  bdng  a  dim-tor,  U  entitled  to  inspect  any  of  the  book*  of  the 

-  The"  director!  are  in  general  hound  to  exhibit  to  the  general  meeting  of  the  share- 
holders a  •••unary  or  balance-sheet  of  thoir  affairs,  and  to  make  such  further  state- 
•MM  or  report  as  the  >  ">  expedient  and  conducive  to  the  interests  of 

the  company,  la  the  r«ae  of  one  of  these  banks,  even  this  is  not  obligatory  l>y  the 
tams  of  til*  dssd,  which  leave  U  to  the  discretion  of  the  directors  whether  they  do 
or  to  Ml  exhibit  •  *rtilflri*t  •*"»•»  In  a  Terr  extensive  bank,  the  proprietor*  annually 
appoiat  aaditon  to  examine  the  affairs  of  the  company,  and  to  report  therm i 

"  In  SOOM  of  the  companies  the  principle  of  secrecy  U  carried  still  further :  two  of 
the  directors,  selected  from  the  rest,  are  the  exclusive  depositors  of  the  power  of  in- 
specting the  private  accounts  of  customers.  These  persons  are  tome  time*  ru!l<  it 
•  confidential  directors.1  This  provision  U  stated  to  be  made  '  in  order  that  the  credit 
and  private  transactions  of  individuals  may  be  preserved  inviolate..'  Sometimes  tin  y 
are  called  '  maaaewf  directors ';  sometimes  '  special  directors.'  In  other  companies, 
though  all  the  directors  have  the  power  uf  inspection  of  the  accounts  of  customers, 
two  of  the  directors  are  selected  to  inspect  bills  and  notes, '  in  order  to  prevent  the 
re  of  such  bills  of  exchange  and  promissory  notes  as  may  pass  through  the 
These  two  directors  are  called  '  the  bill  committee.'  In  two  of  the  com- 
,  a  single  person,  called  'the  manager,'  has  the  exclusive  power  of  inspecting 


panic*. 

!..:-  • 


1  Fourthly,  as  to  the  terms  on  which  the  company  is  to  be  dissolved. 

•  The  deeds  of  all  these  companies  contain  some  provision  for  dissolution  in  certain 
contingencies.    It  is  in  general  provided  that  a  dissolution  of  the  company  shall  take 
place  by  reason  either  of  a  certain  amount  of  loss,  or  of  a  voluntary  agreement.    Dis- 
solution by  reason  of  loss  in  the  great  majority  of  the  deeds  is  provided  for  in  die  fol- 
lowing manner. 

"  It  is  necessary  to  premise  that  the  directors  of  each  of  these  companies  are  bound 
10  set  aside  a  certain  portion  of  the  profits  to  form  a  fund  to  meet  extraordinary  de- 
mands, which  fund  is  sometimes  called  the  *  surplus  fund,'  sometimes  the  '  reserve  fund.' 
tmt  more  usually  the  'guarantee  fund.'  The  ordinary  provision  for  dissolution  is  to 
this  effect :  —  That  if  the  losses  sustained  shall  at  any  time  have  absorbed  the  whole 
of  this  guarantee  fund,  and  also  one  fourth  of  the  capital  paid  up,  then  any  one  share- 
holder may  require  the  dissolution  of  the  company,  which  shall  take  place  accordingly, 
••less  two  thirds  in  number  and  value  of  the  shareholders  shall  be  desirous  of  con- 
tinuing the  company,  and  shall  purchase  the  shares  of  those  proprietors  who  wi>h  to 
withdraw.  In  one  bank  the  dissolution  of  the  company  takes  place  upon  a  loss  of 
one  fifth  instead  of  one  fourth  of  the  capital.  In  two  other  banks  no  mention  is  made 
of  the  guarantee  fund. 

*  The  provision  of  the  great  majority  of  deeds,  as  above  stated,  is,  that  in  the  event 
of  a  given  amount  of  loss,  any  one  shareholder  mav  propose  the  dissolution.    In  some, 
three  shareholders  are  required.     In  the  Hanking  Company  A.  the  requisition  for  dis- 
solntion  most  be  made  by  ten  shareholders  holding  200  shares ;  in  the  Bank  B.  by 
one  fourth  of  the  company  ;  but  if  the  loss  amount  to  one  half  the  capital,  then  by 
any  single  shareholder. 

"  By  the  general  provisions  of  the  great  majority  of  deeds,  the  dissolution  of  the 
company,  thoagh  duly  proposed,  may  be  averted  by  two  thirds  of  the  proprietors ;  but 
!•  some  there  exists  no  such  restriction ;  and  on  the  occurrence  of  a  given  amount  of 
loss,  the  dissolution,  if  proposed,  must  necessarily  take  place.  In  other  instances,  on 
the  appearance  of  a  given  amount  of  loss,  the  dissolution  is  to  take  place  immediately, 
even  though  no  partner  should  propose  it." 

LIST  OF  COUNTRY  JOINT-STOCK  BANKS. 

.  The  following  Tables  contain  a  complete  exhibit  of  the  Country  Joint- 
Stock  Banks,  as  in  existence,  July,  1849,  arranged  in  alphabetical  order, 
and  showing,  —  I.  The  location  of  the  Head  Office.  II.  When  established. 
111.  Number  of  Branches.  IV.  Paid-up  Capital.  V.  Reserved  Fund. 
VI.  Last  Dividend.  VII.  Amount  of  Authorized  Issue.  VIII.  Name 
of  Manager. 

302 


Country  Joint- Stocx  Banks. 


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A   TrealUe  on  Banking. 

We  have  no  official  return  of  the  present  amount  of  the  paid-up  capital 
of  all  the  joint-stock  banks.  But  from  the  best  information  that  has  been 
collected  on  the  subject,  it  would  appear  that  the  number  of  partners  in 
all  the  banks  in  England  (including  those  of  London)  is  about  23,000,  the 
paid-up  capital  about  £  14,000,000,  and  the  reserved  funds  .£2,000,000. 

Tbo  following  country  Joint-stock  Banks  in  England  have  stopp-d  p.-iy- 
roent.  At  we  hate  elscwhrre  discussed  the  causes  of  the  failure  of  joint- 
stock  banks  generally,  we  need  make  no  observations  on  them  individu- 
ally. 

Dai»  of  Date  of 

Eitaltiuhment.  Stoppagt 

I    Birmingham  —  Birmingham  Borough  Bank  Mar.  1837  .        .        .         1840 

»,  Devonport  —  Wertern  District  Bank         .  Sept.!  836  .        .        .1844 

3.  Leamington  —  Leamington  Bank         .  May,  1835  .        .        .        1837 

4.  Leeds—  Lced*  and  West  Riding  Bank       .  Oct.  1835  .         .        .    1846 

5.  Lirerpool—  Lirerpool  Banking  Company  Alar.  1836  .        .        .        1847 
6   Manchester—  Bank  of  Manchester    .        .  Mar.  1839  .        .        .    1842 


Aug.  1834  ...         1840 

8.  Manchester—  Imperial  Bank  of  England   .  Dec.  1836  .        .        .    1839 

9.  Newcastle  —  Newcastle  Joint-Stock  Bank  July,  1836  .        .        .        1846 

10.  Newcastle  —  North  of  England  Bank         .  Dec.  1832  .        .        .1847 

11.  Sheffield  —  Sheffield  and  Rctford  Bank  Aug.  1839  .        .        .        1846 
IS.  Southampton  —  Southern  District  Bank    .  Dec.  1836  .        .        .    1841 
IS.  Walaall  —  Waball  and  South  Stafford-) 

shire  Bank 


.       Ig35  J840 


14.  York  —  Yorkshire  Agricultural  and  Com-  )        .       .  „,.. 

mercial  Bank      .        .        .        .        .)       An6-»»  ...    1 

No.  1  was  formed  out  of  the  remnants  of  a  branch  of  the  Northern  and 
Central  Bank  of  England.  No.  4  was  formed  on  the  private  bank  of 
Messrs.  Smith  &  Son.  No.  5  was  at  first  called  the  Tradesman's  Union 
Bank,  and  under  that  title  made  returns  to  the  Joint-stock  Banking  Com- 
mittee of  the  House  of  Commons  in  1836.  No.  10  is  now  winding  up  its 
affairs  under  "  The  Joint-stock  Companies1  Winding-up  Act,  1848." 

The  following  Joint-Stock  Banks  wound  up  their  affairs  without  stop- 
ping payment  :  — 

Date  of  Date  of 

EttabiUtimtnt.  IT;  •..;>,•   •./>. 

1  .  Ipswich  —  Suffolk  Banking  Company        .  April,  1842  .        .        1845 

'«.  Leeds—  Yorkshire  District  Bank  .        .        .  Aug.  1834  .        .        .1843 

3.  Leeds  —  Commercial  Bank  of  Leeds  .        .  July,  1836  .        .        1846 

4.  Lmrpool—  Albion  Bank       ....  May,  1836  .        .        .     1842 
*  5.  Limpool  —  Fh«nix  Bank           .         .        .  Jan.    1837  .        .        1838 

6.  Manchester  —  Northern  and  Central  Bank)     ,,„    ,„„.  lfl,A 

of  England     ......  )  Mar>  1834  *    ] 

7.  Manchester—  South  Lancashire  Bank  .        .  May,  1836  .        .        1843 

8.  Manchester  -  Alliance  Bank  Oct.    1839  .        .        .    1841 
».  OUham  —  Oldham  Banking  Company  .        .  Sept  1836  .        .        1847 

No.  2  was  discontinued,  and  the  shareholders  formed  a  new  bank, 
called  the  Yorkshire  Banking  Company,  taking  all  the  premises  and  olli- 
cers  of  the  old  bank.  No.  3  was  formed  on  the  private  bank  of  Messrs 
By  water  dc  Co.  No.  4,  The  Tradesman's  Bank  of  Liverpool  merged  in 
this  bank.  Afterwards  it  wound  up,  paying  back  to  its  proprietors  all  the 

'   " 


Country  Joint-Stock  Banks. 

capital  and  a  bonus  besides.  No.  5  was  formed  out  of  the  remnants  of  a 
branch  of  the  Northern  and  Central  Bank  ;  it  existed  only  a  short  time. 
No.  8,  The  Northern  and  Central  Bank,  realized  about  10s.  in  the  pound 
of  its  capital.  Some  of  the  shareholders  with  that  portion  of  their  capital 
formed  this  bank.  It  never  did  much  business,  and  after  a  while  its  capi- 
tal was  lent  to  the  Bank  of  Manchester,  upon  the  promissory  notes  of  that 
bank,  at  two  or  three  years'  date,  bearing  interest  at  5  per  cent.  No.  9  ; 
a  well-managed  bank,  but  having  only  a  small  capital,  the  directors  deter 
mined,  after  the  pressure  of  1847,  to  wind  up  its  affairs. 
Banks  which  stopped,  and  soon  afterwards  resumed  :  — 

Date  of 
Establishment, 

1.  Liverpool  —  Royal  Bank  of  Liverpool        .        May,  1836 

2.  Liverpool  —  North  and  South  Wales  Bank        May,  1836    . 
S.Newcastle  —  Union  Bank  of  Newcastle  July.  1836 

4.  Nottingham  —  Nottingham  and  Nottingham-  )      A     .,  ,„„.  ,,,.„ 

shire  Banking  Company         .        .         .$     APn1'18' 

Nos.  1  and  2  stopped  during  the  pressure  of  1847,  but  soon  afterwards 
resumed.  No.  3  stopped  at  the  same  period,  but  have  resumed  at  three  of 
their  branches,  and  are  about  to  resume  at  Newcastle.  No.  4  was  stop- 
ped in  1842  by  their  London  agent.  They  changed  their  agent,  and  re- 
sumed. 

The  following  Joint-stock  Banks  have  merged  in  other  Joint-stock 
Banks  :  — 

Banks  into  which  Date  of  When 

Banks.  they  merged.  Establishment,    merged. 

I.Birmingham  —  Bank  of  Binning-  ?     Birmingham  Banking  7     .        ,QQO        1QQ- 
ham          .....  5         Company        .        .$   AuS'  1832   '     1837 

2.  Lichfield  —  Lichfield,  Rugeley,  and  )     National  Provincial    >    v       1QQ(.         10,Q 

Tamworth  Banking  Company  5          Bank    .        .        .  $   *° 

3.  Newport  -Isle  of  Wight  Banking?  Di  May,  1842   .     1844 

Company  .  )  •" 

4   Norwich  —  Norwich  and  Norfolk?     ,,    .    .  ,-,     ,     ,  T>     u    AT       1QO,         IQOA 
j>     u  >     .Last  ot  England  Bank    Mar.  1827    .     1836 

5.  Stockton  —  Stockton  and  Durham  )     National  Provincial   >   T.       ia«Q        ,a.~ 

y^t.-ni  f  T>      i  t    JJeC.    looo    .      184O 

County  Bank  .        .        .        .  )         Bank     .        .        .  $ 

"  Return  of  the  Joint-stock  Banks  which  have  been  established  under 
the  provision  of  the  Act  7  Geo.  IV.  c.  46,  stating  the  period  when,  and 
the  place  where,  established,  and  likewise  the  dates  at  which  any  such 
banks,  once  established,  had  ceased  to  exist."  Besides  those  we  have 
mentioned,  this  list  contains  the  following  :  — 

The  Period  when    The  Places  where 
Name  of  the  Bank.  established.  established.  Date  of  ceasing. 

1.  Bank  of  South  Wales    .    Feb.  26,  1835      Carmarthen      Last  license,  Oct.  1836. 

2.  Bristol  Old  Bank        .        June  16,  1826      Bristol  Last  license,  Oct.  1840. 


. 

3-  Bury  andHeywoodBank-  7  Qo  .  ,  7  ,  MR  (  Bury  and  5  ^'ast  an(i  onty 

ing  Company    .        .  5  bept  17'  18  6  [     Heywood  \     Sept.  1836. 

4.  Central  Bank  of  Liver-  )  De(J  3  1836  Liverpool  Last  retuni)  Aprfi,  i839. 


5.  G1esounty  and  }  Dec.  31,  1834      Gloucester         Last  return,  June,  1836 

307 


A  Treatitf  on  Banking. 

Tftt  ftrferf  M*m    TM  Ptocw  irJUra 
•/(*•»»•*  mt»U*k*  t«aMu**i.  Da*  if  noting. 

Nortk  }  N"-  ll-  1M4  {  n  iSS?1  ^  }  ^  »<*»•«•  °ct-  18M-  •  t 

7.  Lekf»i*r»hire  and  War*  i 

trkuhirt!  Joint-stock  >  Sept  14,  1840    Hincklcy       .    Lut  license,  Oct.  1  840. 
j 


t.  Leith  Hanking  Comt*nv   Nor.  S3,  1837     Carlisle          .    Last  license,  Oct  1  836 

*'  Nw"wi<*4  ~ttth  **••"  Jjaly  85,  1839    Nantwich. 
•hire  Liajik.         .         .  ) 

No.  1  is  the  private  bonk  of  Messrs.  Watkins  &  Co.  The  number  of 
partners  exceeding  six,  the  firm  was  registered  as  a  joint-stock  bank. 
The  number  has  been  reduced  by  death,  and  therefore  the  registry  is  no 
longer  required.  The  head  office  is  at  Brecon.  No.  2.  This  is  the  pri- 
Tate  bank  of  Messrs.  Elton,  Baillie,  &  Co.,  who,  having  eight  partners, 
registered  as  a  joint-stock  bank.  Three  of  the  partners  nave  since  died, 
so  that  the  number  is  reduced  to  five.  Since  the  year  1844  they  have 
discontinued  the  issue  of  their  own  notes.  No.  3.  This  bank  was  in  ex- 
istence only  a  few  months.  No.  4.  This-  was  a  small,  ill-regulated  bank, 
that  brought  itself  to  a  close.  No.  5.  This  bank  was  formed  by  Mr. 
Charles  Cripps,  who  had  been  the  agent  of  the  Bank  of  England  branch 
at  Gloucester.  It  existed  for  a  short  time,  and  then  became  a  branch  of 
the  County  of  Gloucester  Bank.  No.  6.  This  bank  had  seven  partners. 
It  is  presumed  to  have  been  the  private  bank  of  Messrs.  Douglas,  Swalley, 
dc  Co.,  who  stopped  payment  in  the  year  1839.  No.  7.  This  bunk  was 
formed  on  the  private  bank  of  Messrs.  Heming  &  Needham,  at  Hinckley. 
It  continued  only  a  very  short  time.  No.  8.  The  Leith  Banking  Com* 
pan  v  had  a  branch  at  Carlisle,  and  consequently  registered  as  an  English 
bank.  No.  9.  This  was  a  small,  but  respectable  bank,  that  transferred 
its  business,  on  the  1st  of  January,  1845,  to  the  Manchester  and  Liverpool 
Dintrict  Bank. 

Two  joint-stock  banks  have  failed  in  the  Isle  of  Man. 

1.  The  Isle  of  Man  Joint-stock  Bank.     This  bank  was  formed  on  the 
private  bank  of  Messrs.  Forbes  &  Co.    They  were  largely  in  debt  to  their 
London  agent,  and  their  affairs  have  led  to  much  litigation. 

2.  The  Isle  of  Man  Commercial  Banking  Company.     The  business  of 
this  bank  has  been  taken  up  by  the  City  of  Glasgow  Bank,  who  have 
Opened  a  branch  in  the  island  —  called  the  Bank  of  Mona  —  under  the 
management  of  Mr.  John  Stanway  Jackson,  who  was  formerly  manager 
4>f  the  Manchester  and  Liverpool  District  Bank. 

The  following  are  the  provisions  of  the  Act  7  &  8  Viet  c.  113,  passed 
in  1844,  to  regulate  Joint-stock  Banks  in  England  :  — 

jit  Joint-Stork  Bank  ettallithed  after  6tk  May  latt  to  carry  on  btaineu  vnleu  by  virtue  of 
LeOen  Pattmt  granted  according  to  this  Act  ;  but  Cowjjaniet  previoudy  ettiibtiihed  not 
minuted  from  carrying  on  &MMMM  until  Letten  Patent  have  been  granttd. 

"  Wbm**  the  hwt  in  force  for  the  regulation  of  copartnerships  of  banker*  in  Eng- 
laitd  need  to  be  amended  :  lie  it  enacted  by  the  Queen's  mo*t  excellent  Mxjesty,  by 
and  with  the  advice  and  consent  of  the  Lords  Spiritual  and  Temporal,  and  Commons, 
in  this  present  Parliament  assembled,  and  by  the  authority  of  the  same,  That  it  shall 
aot  be  lawful  for  anjr  company  of  more  than  six  persons  to  carry  on  the  trail.  •  or  busi- 
MH  of  bankers  in  England,  after  the  pasting  of  this  Act,  under  "anv  agreement  or  cov- 


Country  Joint- Stock  Banks. 

enant  of  copartnership  made  or  entered  into  on  or  after  the  sixth  day  of  May  last 
passed,  unless  by  virtue  of  letters  patent  to  be  granted  by  her  Majesty  according  to  the 
provisions  of  this  Act ;  but  nothing  herein  contained  shall  be  construed  to  restrain  any 
such  company  established  before  the  said  sixth  day  of  May,  for  the  purpose  of  carrying 
on  the  said  trade  or  business  of  bankers  in  England,  from  continuing  to  carry  on  the 
same  trade  and  business  as  legally  as  they  might  have  done  before  the  passing  of  this 
Act.  until  letters  patent  shall  have  been  granted  to  them  severally  on  their  application. 
as  hereinafter  provided,  to  be  made  subject  to  the  provisions  of  this  Act. 

Company  to  Petition  for  a  Charter. 

"  II-  And  be  it  enacted,  That  before  beginning  to  exercise  the  said  trade  or  business 
every  such  company  shall  present  a  petition  to  her  Majesty  in  council,  praying  that 
her  Majesty  will  be  graciously  pleased  to  grant  to  them  letters  patent  under  this  Act ; 
and  every  such  petition  shall  be  signed  by  seven  at  least  of  the  said  company,  and  shall 
set  forth  the  following  particulars  ;  that  is  to  say,  — 

"  First,  The  names  and  additions  of  all  the  partners  of  the  company,  and  the  name 
of  the  street,  square,  or  other  place,  where  each  of  the  said  partners  reside. 

"  Second,  The  proposed  name  of  the  bank. 

"  Third,  The  name  of  the  street,  square,  or  other  local  description  of  the  place  or 
places  where  the  business  of  the  bank  is  to  be  carried  on. 

'•  Fourth,  The  proposed  amount  -of  -the  capital  stock,  not  being  in  any  case  less  than 
one  hundred  thousand  pounds,  and  the  means  by  which  it  is  to  be  raised. 

"  Fifth,  The  amount  of  capital  stock  then  paid  up,  and  where  and  how  invested. 

"  Sixth,  The  proposed  number  of  shares  in  the  business. 

"  Seventh,  The  amount  of  each  share,  not  being  less  than  one  hundred  pounds  each. 

Charter  to  be  granted  on  Report  of  Board  of  Trade. 

"  III.  And  be  it  enacted,  That  every  such  petition  shall  be  referred  by  her  Majesty 
to  the  Committee  of  Privy  Council  for  Trade  and  Plantations ;  and  so  soon  as  the 
Lords  of  the  said  committee  shall  have  reported  to  her  Majesty  that  the  provisions  of 
this  Act  have  been  complied  with  on  the  part  of  the  said  company,  it  shall  thereupon 
be  lawful  for  her  Majesty,  if  her  Majesty  shall  so  think  fit,  with  the  advice  of  her  Privy 
Council,  to  grant  the  said  letters  patent. 

Deed  of  Settlement. 

"  IV.  And  be  it  enacted,  That  the  deed  of  partnership  of  every  such  hanking  com- 
pany shall  be  prepared  according  to  a  form  to  he  approved  by  the  Lords  of  the  said 
committee,  and  shall,  in  addition  to  any  other  provisions  which  may  be  contained 
therein,  contain  specific  provisions  for  the  following  purposes;  that  is  to  say, — 

"  First,  For  holding  ordinary  general  meetings  of  the  company  once  at  least  in  every 
year,  at  an  appointed  time  and  place. 

"  Second,  For  holding  extraordinary  general  meetings  of  the  company,  upon  the 
requisition  of  nine  shareholders  or  more,  having  in  the  whole  at  least  twenty-one 
shares  in  the  partnership  business. 

"  Third,  For  the  management  of  the  affairs  of  the  company,  and  the  election  and 
qualification  of  the  directors. 

"  Fourth,  For  the  retirement  of  at  least  one  fourth  of  the  directors  yearly,  and  for 
preventing  the  reflection  of  the  retiring  directors  for  at  least  twelve  calendar  months. 

"Fifth,  For  preventing  the  company  from  purchasing  any  shares,  or  making  ad- 
vances of  money,  or  securities  for  money,  to  any  person  on  the  security  of  a  share  or 
shares  in  the  partnership  business. 

"  Sixth,  For  the  publication  of  the  assets  and  liabilities  of  the  company  once  at  least 
in  every  calendar  month. 

"  Seventh,  For  the  yearly  audit  of  the  accounts  of  the  company,  by  two  or  more  au- 
ditors, chosen  at  a  general  meeting  of  the  shareholders,  and  not  being  directors  at  the 
time. 

"  Eighth,  For  the  yearly  communication  of  the  auditors'  report,  and  of  a  balance- 
sheet,  and  profit  and  loss  account,  to  every  shareholder. 

"Ninth,  For  the  appointment  of  a  manager,  or  other  officer  to  perform  the  duties  of 
manager. 

"And  such  deed,  executed  by  the  holders  of  at  least  one  half  of  the  shares  in  the 

309 


IIOMIJI 
•p.  •hull 


A  Tftatite  OH  li.iniing. 

,  on  which  not  leas  than  ten  pound*  on  each  such  share  of  one  I, mi. in-. I 
.  and  in  proportion  for  tvery  share  of  larger  amount,  shall  have  been  then 
t  ;K  shall  h*  annexed  to  the  petition;  and  the  j.r.-M  ,  \uth  MI,  h  others 

M  10  her  Mijertj  shall  Mem  fit,  shall  be  set  furili  in  the  letter*  patent. 

••may  IP  nmmmet  Bminm  tiS  D*d  ttiatttd  oarf  all  the  Sham  nbtenbedfor,  ana 
at  but  Uafftkt  Amount  pai.i  „,. 

"  V.  Provided  always,  and  be  it  enacted.  That  it  shall  not  be  lawful  for  any  inch 
.vtmpany  to  commence  business  until  all  the  shares  shall  have  been  snb--ni.,-d  tor,  mi  I 
the  deed  of  partnership  shall  have  been  executed,  personally  or  by  some  i» 
Authorised  by  warrant  of  attorney  to  execute  the  same  on  behalf  of  sue  h  h-:- 
hoMtn,  bv  the  holders  of  all  the  share*  in  the  said  business,  and  until  a  sum  of  not  less 
than  cue  half  of  the  amount  of  each  share  shall  have  been  paid  up  in  resp> 
•m-h  •Hare;  and  it  shall  not  be  lawful  for  the  company  to  repay  any  pan  of  i...-  M>U. 
><>  paid  np  without  leave  of  the  Lords  of  the  said  committee. 

Company  to  be  Incorporated. 

"VI  And  be  it  enacted,  That  it  shall  be  lawful  for  her  Majesty,  in  and  by  such  let- 
to  grant  that  the  persons  by  whom  the  said  deed  of  partnership  shall  h:ive 
and  all  other  persons  who  shall  thereafter  become  shareholders  in  the 


.  their  executors,  administrators,  successors,  and  assigns  respcc- 
tirdy.  shall  be  one  body  politic  and  corporate,  by  snch  name  as  shall  be  given  to  them 
ia  aad  by  toe  «aid  letters  patrtit.  for  the  purpose  of  carrying  on  the  said  lmnkin<;  l>usi- 
IMM,  and  by  that  name  shall  have  perpetual  succession  and  a  common  seal,  and  slmll 
have  power  to  purchase  and  hold  lands  of  such  annual  value  as  shall  be  expressed  in 
«och  wtten  patent;  and  snch  letters  patent  slml!  U-  ^rMiitc-.l  for  a  term  of  ycui- 
exceeding  twenty  Tears,  and  may  be  made  subject  to  such  other  provisions  and  stipu- 
lation* a*  to  her'Majesty  may  seem  fit. 

Incorporation  not  to  limit  tJie  Liability  of  the  Sharfholden. 

'  Provided  always,  and  be  it  enacted.  That  notwithstanding  such  incorporation 
t!»e  several  shareholders  f.>r  tin-  time  In-in^  in  the  said  banking  business,  nnd  tln».j  who 
.  have  been  shareholders  therein,  nnd  their  several  executors,  administrators,  sue- 
<c*sor«.  and  assigns,  shall  be  and  continue  liaMe  for  all  the  dealings,  covenants, 
undertakings  of  the  said  company,  sulijuct  to  tin-  provisions  hereinafter  contained,  a* 
fully  as  if  the  said  company  were  not  incorporated. 

By  the  48th  section  of  this  Act,  "  Every  company  of  more  than  six 
persons  carrying  on  the  trade  or  business  of  bankers  in  England,  shall  be 
deemed  a  trading  company  within  the  provisions  of  an  Act  passed  in  this 
session  of  Parliament,  entitled  *  An  Act  for  facilitating  the  winding  up  the 
aflaira  of  Joint-stock  Companies  unable  to  meet  their  pecuniary  engage- 
ments.' w 

This  Act  is  the  7  and  8  Viet.  cap.  Ill  (September,  1844), and  it  rm- 
ilera  all  joint-stock  companies  subject  to  the  law  of  bankruptcy.  No  joint- 
Mock  bank  has  ever  been  made  bankrupt.  It  is  presumed,  from  the  num- 
ber of 'regulations  prescribed- by  the  Act,  that  the  process  of  bankruptcy 
would,  in  the  case  of  a  banking  company,  be  both  tedious  and  expen- 
sive. 

In  the  year  1848  an  Act  was  passed  (11  and  12  Viet.  cap.  45),  to 
amend  the  Acts  for  facilitating  the  winding-tip  the  affairs  of  joint-- 

,;»anicft  unable  to  meet  their  pecuniary  ••tiL.r:i'_ri-Mi'-nts,  and  also  to  facil- 
itate the  dissolution  and  winding-up  of  joint-stock  companies  and  other 
partnershiM.  The  legal  title  of  this  Act,  to  distinguish  it  from  other  Acts 
is  •*  The  Joint-stock  Companies'  Winding-up  Act,  1848." 

The  object  of  this  Act  is  to  enable  the  directors  of  an  insolvent  coni- 

310 


The  Banks  of  Scotland. 

pany  to  compel  the  shareholders  individually  to  pay  their  proportion  of  the 
loss.  There  was  previously  much  difficulty  in  doing  this.  If  all  the  nom- 
inal capital  had  been  called  up,  the  directors  could  make  no  further  calls. 
In  cases  where  they  had  the  power  of  making  calls  these  calls  could  not 
be  enforced  without  an  appeal  to  the  Court  of  Chancery.  It  was  therefore 
customary  for  the  directors  to  "  confess  judgment "  to  some  creditor,  and 
this  creditor  brought  actions  against  the  refractory  shareholders  for  the 
whole  amount  of  his  claim,  but  granted  a  release  on  receiving  that  sum 
which  the  shareholders  ought  justly  to  pay,  in  proportion  to  their  shares. 

By  this  Act  the  directors  or  any  shareholder  of  a  company  that  has 
stopped  payment,  may  present  a  petition  to  the  Lord  Chancellor,  or  to  the 
Master  of  the  Rolls,  in  a  summary  way,  for  the  dissolution  and  winding-up 
of  the  company.  If  the  order  be  granted,  it  is  referred  to  a  Master  in 
Chancery,  who  will  appoint  an  official  manager  to  wind  up  the  affairs  of 
the  company.  The  official  manager  is  to  collect  all  the  debts  due  to  the 
company,  and  to  pay  all  its  creditors.  With  the  consent  of  the  Master  he 
can  make  calls  on  the  shareholders,  for  such  amounts,  and  payable  at 
such  times,  as  the  Master  may  direct.  The  company  is  to  sue  and  be 
sued  in  the  name  of  the  official  manager.  The  object  of  the  Act,  how- 
ever, is  rather  to  settle  disputes  and  claims  of  the  shareholders  among 
themselves,  than  to  protect  them  against  their  creditors.  Clause  58  has 
an  especial  provision  with  reference  to  this  subject :  — 

Act  not  to  affect  Rights  of  Creditors  nor  existing  Contracts. 

"  LVIII.  Provided  always,  and  be  it  enacted,  That,  except  as  is  by  this  Act  ex- 
pressly provided,  nothing  in  this  Act  contained,  nor  any  petition  or  order  under  the 
same  for  the  dissolution  and  winding  up  or  for  the  winding  up  of  any  company,  shall 
extend  or  enlarge,  diminish,  prejudice,  or  in  any  wise  alter  or  affect  the  rights  or  reme- 
dies of  creditors,  or  other  persons  not  being  contributories  of  the  company,  or  the  rights 
or  remedies  of  creditors  being  also  contributories,  but  being  creditors  of  the  company 
upon  a  distinct  and  independent  account,  whether  against  the  company  or  against  any 
of  the  contributories  of  the  same,  nor  the  rights  or  remedies  of  the  company  against 
any  contributories  or  other  persons,  nor  shall  alter  or  affect  any  contracts  or  engage- 
ments entered  into  by  or  with  the  company,  or  any  person  acting  on  behalf  of  the 
same,  previously  to  any  such  petition,  nor  any  actions,  suits,  or  other  proceedings 
pending  at  the  date  of  such  petition." 


SECTION  VI.  — THE  BANKS  OF  SCOTLAND. 

IN  this  Section  we  shall  consider  the  following  topics  :  — 

I.  The  Law  of  Scotland  with  reference  to  Banking. 

II.  The  Existing  Banks  of  Scotland. 

III.  A  Comparison  between  the  Banks  of  Scotland  and  those  of  England. 

IV.  The  Laws  of  the  Currency  with  reference  to  Scotland. 

V.  Those  operations  of  the  Scotch  Banks  that  refer  to  the  System  of  Cash  Credits, 

Interest  on  Deposits,  Remittances  to  India,  and  the  Settlement  of  the  Ex- 
changes. 

VI.  The  Exchange  Banks  and  Exchange  Companies 

311 


A  Treatise  on  Banking. 

I.  —  TV  Law  of  Scotland  with  Reference  to  Banking. 

The  prnrml  provisions  of  the  law  of  Scotland  bearing  upon  this  sub- 
ject, are  calculated  to  promote  the  solidity  of  banking  establishments. 

1.  There  is  no  limitation  to  the  number  of  partners. 

8.  The  private  fortune  of  every  partner  is  answerable  for  the  debts  of 
the  bank. 

3.  Land,  as  well  as  other  property,  may  be  attached  for  debt 

4.  In  Scotland   all  land  is  registered ;  so  it  is  easy  for  any  indi- 
vidual, by  referring  to  the  records,  to  ascertain  wh.-it  hmlril  property  is 
possessed  by  the  partners  of  the  bank,  and  also  whether  or  not  it  !><•  m«.r;- 
gngr«l.     The  following  is  the  language  of  the  Report  of  the  ( 'ommitter  of 
the  House  of  Commons,  appointed  in  1826  to  consider  the  expediency  of 
abolishing  all  notes  under  £  5 :  — 

"There  fa  no  limitation  upon  the  number  of  partners  of  which  a  hanking  company 
mar  roti«i«t ;  and,  excepting  in  the  case  of  the  Rank  of  Scotland  ami  ilu>  two  ehar- 
trred  banks,  which  hare  very  considerable  capitals,  tin-  II.U-IH.T-,  of  all  hanking  compn- 
BiH  are  bound  jointly  and  severally,  so  that  each  partner  is  liable  to  the  whole  extent 
of  Us  fortune  for  the  whole  debts  of  the  company. 

A  '.  :  >r  in  Scotland  is  empowered  to  attach  the  real  and  portable,  an  well  as  the 
pmonal  <*tate  of  his  debtor,  for  payment  of  personal  debts,  ain»n^  which  may  he 
classed  debts  doe  by  bills  and  promissory  notes ;  and  recourse  may  !><•  h.ul  for  the  pro- 
raring  payment  to  each  description  of  property  at  the  same  time.  K\c<  ution  is  not 
confined  to  the  real  property  of  a  debtor  merely  daring  his  life,  but  proceeds  with  equal 
effect  upon  that  property  after  hi*  decease. 

~  The  law  relating  to  the  establishment  of  records  gives  ready  moans  of  procuring 
information  with  respect  to  the  real  and  heritable  estate  of  which  any  person  in  Scot- 
land may  I >c  possessed.  No  purchase  of  an  estate  in  that  country  i>  -••<  urc  until  the 
seisine  (that  is,  the  instrument  certifying  that  actual  delivery  has  Seen  given)  is  put  on 
record;  nor  is  any  mortgage  effectual  until  the  deed  is  in  like  manner  recorded. 

"  In  the  case  of  conflicting  pecuniary  claims  upon  real  property,  the  preference  is 
not  regulated  by  the  date  of  the  transaction,  but  by  the  date  of  its  record.  These  rec- 
ord* are  accessible  to  all  persons ;  and  thus  the  public  can  with  cane  ascertain  the 
effective  means  which  a  banking  company  possesses  of  di-cliairin.-  its  obligations,  and 
tttt  partner*  in  that  company  are  enabled  to  determine  with  tolerable  aeeuraey  the  de- 
free  of  ri»k  and  responsibility  to  which  the  private  property  of  each  is  exposed. 

"There  are  other  provisions  of  the  law  of  Scotland,  which  it  is  not  necessary  mi- 
nutely to  detail,  the  general  tendency  of  which  is  the  same  with  those  above  men- 

The  following  Acts  of  Parliament  have  been  passed  in  reference  to 
banking  in  Scotland  :  — 

"  Toe  flrat  notice  of  hanking  in  Scotland  which  occurs  in  the  statute-book,  is  an  act 
of  King  William  the  Third,  passed  in  the  year  1695,  under  which  the  Bank  of  Scot- 
land was  established.  By  this  Act  an  exclusive  privilege  of  banking  was  conferred 
upon  that  bank,  it  being  provided  'that  for  the  period  of  twenty  years  from  the  17th 
July,  1695.  it  shovld  not  be  lawful  for  any  other  person  to  set  up  a  distinct  company 
or  bank  within  the  kingdom  of  Scotland, 'besides  those  persons  in  whose  favor  this  Act 
WM  granted.'  No  renewal  of  the  exclusive  privilege  took  place  after  the  expiration 
of  ike  twenty-one  years. 

-  The  Bank  of  Scotland  first  issued  notes  of  20«.  in  the  year  1704 ;  bat  the  amount 
of  notes  in  circulation  previous  to  the  Union  was  very  limited. 

"  The  Bank  of  Scotland  continued  the  only  bank  from  the  date  of  its  establishment 
in  Ift95.  to  the  veer  1717. 

-  In  ihat  year  a  charter  of  incorporation  was  granted  to  certain  individuals  named 
therein,  tbr  cailjlag  on  the  badness  of  banking  under  the  name  of  the  Royal  Bank ; 

312 


Scotch  Banking. 

and  subsequent  charters  were  granted  to  this  establishment,  enlarging  the  capital, 
which  now  amounts  to  one  million  and  a  half. 

"An  Act  passed  in  the  year  1765  is  the  first  and  most  important  Act  of  the  Legis- 
lature which  regulates  the  issue  of  promissory  notes  in  Scotland. 

"  It  appears  from  its  preamble,  that  a  practice  had  prevailed  in  Scotland  of  issuing 
notes  which  circulated  as  specie,  and  which  were  made  payable  to  the  bearer  on  de- 
mand, or  payable  at  the  option  of  the  issuer  at  the  end  of  six  months,  with  a  sum 
equal  to  the  legal  interest  from  the  demand  to  that  time. 

"  The  Act  of  1765  prohibits  the  issue  of  notes  in  which  such  an  option  as  that  be- 
fore mentioned  is  reserved  to  the  issuer.  It  requires  that  all  notes  of  the  nature  of  a 
bank-note,  and  circulating  like  specie,  should  be  paid  on  demand ;  and  prohibits  the 
issue  of  any  promissory  note  of  a  sum  less  than  20s. 

"  With  respect  to  the  issue  of  promissory  notes  in  England,  an  Act  was  passed  in 
1775,  prohibiting  the  issue  of  any  such  notes  under  the  sum  of  20s.  And  in  the  year 
1777,  restraints  were  imposed  by  law  on  the  issues  of  notes  between  the  sum  of  20s. 
and  £  5,  which  were  equivalent  to  the  prohibition  of  such  notes  circulating  as  specie. 

"In  the  year  1797,  when  the  restrictions  as  to  payments  in  cash  were  imposed  upon 
the  Bank  of  England,  the  provisions  of  the  Act  of  1777,  with  regard  to  the  issue  of 
notes  between  20s.  and  £5  were  suspended.  By  an  Act  passed  in  the  third  year  of 
his  present  Majesty,  the  suspension  was  continued  until  the  5th  of  January,  1833  ;  but 
now  stands  limited  by  an  Act  of  the  present  session  to  April  5,  1829." 

"  The  general  result  of  the  laws  regulating  the  paper  currency  in  the  two  countries 
in  this  :  — 

"  That  in  Scotland,  the  issue  of  promissory  notes  payable  to  bearer  on  demand  for  a 
sum  of  not  less  than  20s.  has  been  at  all  times  permitted  by  law,  nor  has  any  Act  been 
passed  limiting  the  period  for  which  such  issue  shall  continue  legal  in  that  country. 
In  England,  the  issue  of  promissory  notes  for  a  less  sum  than  £  5  was  prohibited 
by  law  from  the  year  1772  to  the  period  of  the  bank  restriction  in  1797.  It  has  been 
permitted  since  1797;  and  the  permission  will  cease,  as  the  law  at  present  stands,  in 
April,  1829." 

The  Act  which  now  regulates  the  issue  of  bank-notes  in  Scotland  is  8 
and  9  Viet.  c.  38,  passed  in  the  year  1845. 

By  this  Act,  the  power  of  issuing  notes  is  confined  to  those  banks  that 
issued  notes  in  the  year  preceding  the  1st  day  of  May,  1845.  And  the 
amount  to  which  each  bank  may  issue  is  not  to  exceed  the  average 
amount  of  notes  it  had  in  circulation  during  the  year  ending  the  1st  of 
May,  1845,  and  the  amount  of  gold  or  silver  coin  it  may  at  the  time  have 
in  possession  at  the  head  office  or  principal  place  of  issue,  in  the  propor- 
tion that  the  silver  shall  not  be  more  than  one  fourth  the  amount  of  the 
gold. 

This  Act  was  to  come  into  operation  on  the  6th  day  of  December, 
1845.  After  which  day  each  banker  is  to  make  weekly  returns  to  the 
Stamp-office  of  his  notes  in  circulation,  and  of  the  gold  and  silver  coin  on 
hand  ;  and  the  averages  of  four  weeks  are  to  be  published  in  the  London 
Gazette,  with  a  certificate  from  the  commissioner  as  to  whether  the  bank 
has  held  the  amount  of  coin  required  by  this  Act. 

All  banks,  except  the  Bank  of  Scotland,  the  Royal  Bank  of  Scotland, 
and  the  British  Linen  Company,  are  required  to  send  to  the  Stamp-office, 
between  the  1st  and  15th  days  of  January  inclusive,  the  names  of  all 
their  partners,  which  shall  be  published  by  the  1st  day  of  March  follow- 
ing in  some  newspaper  circulating  within  each  town  or  county  respec- 
tively in  which  the  head  office  or  principal  place  of  issue  of  such  bank  is 
situated. 

Bank  of  England  notes  are  not  to  be  a  legal  tender  in  Scotland. 

In  the  Acts  of  Parliament  passed  in  1844  and  1845  for  Regulating 

AA  313 


A  TreatiM  on  Banking. 


Banks  of  Issue  in  England  and  in  Scotland,  we  may  observe  the  follow- 
ing  differences :  — 

1  The  maximum  of  the  circulation  in  England  is  the  average  of  the 
twelve  week*  ending  the  *,i7:h  of  April,  1841.  The  maximum  in  Scot- 
land is  the  average  of  the  year  ending  the  1st  day  of  M;i\ ,  1 

2.  The  Kni»!ish  hanks  ure  no',  under  any  circumstances,  allowed  to  • 
ceed  the  fixed  limit.     Tlie  Scotch  k-inks  arc  allowed  to  i  \cc.-d  their  limit, 
provided  they  hold  in  their  cullers  at  the  head  office  an  amount  of  gu!d 
and  silver  equal  to  such  excess. 

3.  In  England,  should  two  joint-stock  banks  of  issue  effect  a  junction, 
the  .circulation  of  one  of  them  would   be  forfeited,  and  the  united  Ixmk 
could  issue  only  to  the  amount  which  the  other  bank  had  previous! . 
sued.     In  Scotland,  the  united  bank  is  allowed  to  issue  to  the  amount  of 
the  two  circulations  added  together.     There  is  no  express  provision  in  the 
English  Act  with  reference  to  the  junction  of  two  joint-stock  banks.     We 
consider  that  only  one  of  the  banks  would  lose  its  issue,  provided  the 
continuing  bank  retained  its  original  title,  so  as  not  to  create  a  new  bank. 
But  if  by  the  union  a  new  bank  should  be  formed,  then  both  the  banks 
would  lose  their  issues.     In  the  same  way,  we  think  that  the  union  of  an 
issuing  and  a  non-issuing  bank  would  cause  no  change  in  the  issue.     But 
then  the  new  bank  must  retain  the  title  of  the  old  issuing  bank.     Its  right 
of  issue  would  not  be  affected  by  taking  new  directors  or  new  share* 
holder-, 

4.  In  Scotland,  notes  under  .£  5  are  still  permitted.     In  England,  notes 
under  £  5  are  still  prohibited. 

II.  —  The  Existing  Banks  of  Scotland. 

The  following  Table,  which  I  constructed  from  the  parliamentary  evi- 
jJBBPB  of  1826,  contains  an  account  of  the  number  of  the  banks  in  Scot- 
land, the  name  of  the  firm  or  bank,  date  of  its  establishment,  place  of  the 
head  office,  number  of  branches,  number  of  partners,  and  the  name  of 
the  London  agents :  — 

Name*  of  Firm  or  Bank*.  Date.    Head  Office.   Bimnches.  Partn!  London  A yenu. 

I.  Bank  of  Scotland,     ...  1696 

ft.  Rnyal  Bank  of  Scotland,       .  1727 

I  Briitek  LteM  Company,   .       .  1746 

4.  Aberdeen  Banking  Company,  1767 
6.  Ahanhaa  Town  and    County 

Bank.  .       .  '     .       .1885 

t  A/trtwh  Bankinc  Company,  1825 


7.  Carrick  AC*.,  or  9Mp  Bank,  .  1749 
Bank**  Company 

.       .       .  1810 

9.  CnaMKial  Baaktef  Company,  1778 

10.  DMteBankinf  Company,  .  1777 

11.  DMUaeNewBaa*.  .       .       .  1808 
It  DowWCoMHteJalBank,    .  1«6 
111  DwdoeUatoBaak,       .       .  1800 
14. 


Ik  Falktrfc  BaaMacC  aipaoy,     .    1787 
11  rub  BMktec  Ciapny,       .       1808 


Edinburgh, 

16 

chart. 

Ditto, 

1 

ditto, 

Ditto, 

27 

ditto, 

Aberdeen, 

6 

80 

Ditto, 

4 

4*8 

Arbroath, 

2 

118 

Glaagow, 

none, 

3 

Edlnbargh, 

31 

621 

Aberdeen, 

none, 

15 

Dundee, 

i.  ••••. 

61 

Ditto, 

1 

6 

Ditto, 

none, 

202 

Ditto, 

4 

86 

\       :.      .  '    vi, 

— 

1 

Falkirk, 

1 

I 

Cupnr.  Fife, 



89 

314 

Jones,  Loyd,  &  Co. 

Glyn  &  Co. 

Smith,  Payne,  &  Co. 

Jone«,  Loyd,  tt  Co. 
Kinloch  k  Son*. 


R«n»om  &  Co. 
Glyn  &  Co. 
Glyn  &  Co 


The  Banks  of  Scotland. 


17.  Greenock  Banking  Company, 

18.  Glasgow  Banking  Company,    . 

19.  Hunters  &  Co., 

20.  Leith  Banking  Company, . 

21.  National  Bank  of  Scotland,  . 

22.  Montrose  Bank, 

23.  Paisley  Banking  Company,  . 

24.  Paisley  Union  Bank, 

25.  Perth  Banking  Company, 

26.  Perth  Union  Bank,    . 

27.  Ramsay's,  Bonar's,  &  Co.,    . 
23.  Renfrewshire  Banking  Company, 

29.  Shetland  Bank, 

30.  Sir  William  Forbes  &  Co.,    . 

31.  Stirling  Banking  Company, 

32.  Thistle  Bank, 


Date. 

Head  Office.  , 

Branches 

No.  of 
i.  Partn. 

London  Agents. 

1785 

Greenock, 

3 

14 

Kay  &  Co. 

1809 

Glasgow, 

1 

19 

J  Ransom  &  Co.,  and 
I  Glyn  &  Co. 

1773 

Ayr, 

3 

8 

Herries  &  Co. 

1792 

Leith, 

4 

15 

Barnett  &  Co. 

1825 

Edinburgh, 

8 

1,238 

Glyn  &  Co. 

1814 

Montrose, 

2 

97 

Barclay  &  Co. 

1783 

Paisley, 

4 

6 

Smith,  Payne,  &  Co. 

1788 

Ditto, 

3 

4 

Glyn  &  Co. 

1766 

Perth, 

5 

147 

Barclay  &  Co. 

1810 

Ditto, 

— 

69 

Remington  &  Co. 

1738 

Edinburgh, 

none, 

8 

Coutts  &  Co. 

1802 

Greenock, 

5 

6 

Kay  &  Co. 

— 

Lerwick, 

'  — 

4 

Barclay  &  Co. 

— 

Edinburgh, 

— 

7 

(Barclay)  (Coutts). 

1777 

Stirling, 

2 

7 

Kinloch  &  Sous. 

1761 

Glasgow, 

none, 

6 

Smith,  Payne,  &  Co. 

Private  Banking  Companies,  who  do  not  Issue  Notes. 


Thomas  Kinnear  &  Sons, 
Donald  Smith  &  Co.,     . 
Robert  Allen  &  Son, 
Alexander  Allan  &  Co., 


1748  Edinburgh,  none, 

1773  Ditto,  none, 

—  Ditto,  none, 

1776  Ditto,  none, 


Smith,  Payne,  &  Co. 
Glyn  &  Co. 
Barclay  &  Co. 
Barclay  &  Co. 


Since  the  year  1826  the  following  banks  have  been  formed  in  Scot- 
land :  — 

Formed. 

1.  The  Glasgow  Union  Bank, April,  1830. 

2.  The  Ayrshire  Banking  Company,  at  Ayr,        .         .  y  .  Nov.,   1831. 

3.  The  Western  Bank  of  Scotland,  at  Glasgow,      ....  Oct.,    1832. 

4.  The  Central  Bank  of  Scotland,  at  Perth,        ....  April,  1834. 

5.  The  North  of  Scotland  Bank,  at  Aberdeen,        ....  Oct.,     1836. 

6.  The  Clydesdale  Bank,  at  Glasgow, May,    1838. 

7.  The  Southern  Bank  of  Scotland,  at  Dumfries,    ....  Ane,   1838. 

8.  The  Eastern  Bank  of  Scotland,  at  Dundee,     ....  Dec.,    1838. 

9.  The  Edinburgh  and  Leith  Bank, Dec.,    1838. 

10.  The  Caledonian  Bank,  at  Inverness, Feb.,  1839. 

11.  The  City  of  Glasgow  Bank, May,  1839. 

12.  Glasgow  Joint-Stock  Bank, Oct.,  1840. 

13.  The  North  British  Bank,  at  Glasgow,  (not  a  bank  of  issue,)        .  .  1844. 

14.  The  Exchange  Bank  of  Scotland,  at  Edinburgh,  (not  a  bank  of 

issue),          .        ;';"'w.  '"-.       '.        .        .        .     .•  t ......  *  t. .••        .  1845. 

At  present,  the  following  are  the  only  banks  of  issue  in  Scotland  :  — 

A  TABLE  exhibiting  the  CAPITAL  and  other  particulars  of  the  BANKS  OF  ISSUE  IN 
SCOTLAND,  with  the  PRICE  of  their  SHAKES,  as  publicly  quoted  in  December,  1848. 
(From  the  "Edinburgh  Almanac") 


Insti- 
tuted. 


NAME. 


1695.  Bank  of  Scotland, 
1727.  Royal  Bank,    . 
1746.  British  Linen  Company,  233 
1810.  Commercial  Bank, 
1825.  National  Bank, 
1829.  Union  Bank  of  Scot- 
land,      ...      692 


Part"  Rnnrhes  Paid'"P 
ners.  Br      hea'  Capital. 

Dividend. 
Rate.         Payable. 

Share 
Paid. 

Price. 

£ 

£ 

£ 

t. 

(/. 

645 

31 

1,000,000 

7 

April  and  Oct. 

100 

162 

0 

0 

917 

6 

2,000,000 

5 

Jan.  and  July. 

100 

118 

6 

0 

233 

43 

500,000 

8 

June  and  Dec. 

100 

196 

o 

0 

565 

47 

600,000 

7 

Jan.  and  July. 

100 

151 

0 

fl 

1,458 

38 

1,000,000 

6i 

Jan.  and  July. 

10 

13 

•' 

c 

1,000,000 

315 


8         June  and  Dec. 


77    0    0 


A  Trtatiae  on  Banking. 


Prlc*. 


ITM.  rank  Ba«Maf  company. 

ISM.  OMU>!  Btak  of  Scot- 


405 


66,275 


£11,912,130 

Thus  we  find  that,  although  there  were  thirty-two  banks  of  issue  exist- 
ing in  Scotland  in  the  year  1826,  and  twelve  more  banks  of  issue  have 
since  been  formed,  yet  the  present  number  of  issuing  bonks  is  only  eigh- 
teen. It  may  also  be  observed,  that  out  of  the  four  non-issuing  private 
honks  in  Edinburgh,  only  one  remains.  It  will  be  interesting  to  trace  the 
changes  that  have  taken  place  in  the  Scottish  banks  since  the  yc.-ir  lsvit!. 
In  the  following  Table  the  figures  refer  to  the  numbers  in  the  Table  at 
pp.  314,  3J5. 

Change*  in  Scottuh  Bank*  since  1826. 


I 

4.  Arbroath  Banking  Company     . 

9.  Commercial  Bank  of  Aberdeen 

10.  Doadee  Banking  Company 

11.  Dmdee  New  Bank    .    . 

It.  Dundee  Commercial  Bank  . 

13.  Dundee  Union  Bank 

14.  Exchange  and  Deposit  Bank 

15.  Falkirk  Banking  Company 
1*.  Fife  Banking  Company 

17.  fi  •••-•*  ««.M*.g  Company 


19. 

SO.  UrthBaak 

tS.  MontroM  Bank 

53.  Paialey  Bank       .        .        . 

54.  Paialey  Union  Baak 
."--    iVrth  Union  Honk       . 

*7.  nitmrry*r.  Bonar'a,  4  Company 


316 


(  Merged  in   Commercial    Bank  of 

rland. 

$  Merged  in  National  Bank  of  Scot- 
'  (      land. 

Arc  now  Dundee  Bank. 

£  M.-rgfd  in  Eastern  Bank  of  Scot- 
'  \      land. 

I  Mrrged  in  Western  Bank  of  Scot- 
\      land. 
•    Failed. 

Wound  up. 

.    Failed ;  paid  in  full. 
Merged  in  Western  Bank. 
Afterwards  joined  Union  Bank  of 

Scotland. 
Ditto. 
.    Failed. 

Wound  up. 

.    Merged  in  British  Linen  Company 
Merged  in  Union  Bank  of  Scotland 
.     Wound  np. 
Ditto. 


Failures  of  Scotch  Banks. 

28  Renfrewshire  Banking  Company  .        .        .  Failed. 

29.  Shetland  Bank Ditto. 

30.  Sir  W.  Forbes,  J.  Hunter,  &  Co.          .        .  Joined  with  Union  Bank. 

31.  Stirling  Bank Suspended;  paid  in  full. 

32.  Thistle  Bank Merged  in  Union  Bank. 

Non-Issuing  Private  Banks. 

Thomas  Kinnear  &  Sons  ?  (  United  under  the  firm  of  Kinnears, 

Donald  Smith  &  Co.         }'        '        '        '£      Smiths,  &  Co.,  and  afterwards  failed. 

R.  Allan  &  Son Failed. 

Alexander  Allan  &  Co Continue  in  business  as  formerly. 

Of  the  Banks  formed  since  1826 :  — 

The  Glasgow  Union  Bank  joined,  in  1 844,  the  private  bank,  at  Edinburgh,  of  Sir 
William  Forbes  &  Co. ;  and  afterwards  took  the  title  of  the  Union  Bank  of  Scot- 
land. 

The  Edinburgh  and  Leith  Bank,  and 

The  Glasgow  Joint-stock  Bank,  united  in  1844,  and  formed  a  new  bank,  called  the 
Edinburgh  and  Glasgow  Bank. 

The  Ayrshire  Banking  Company  merged  in  the  Western  Bank  of  Scotland. 

The  Southern  Bank  of  Scotland  became,  in  1842,  the  Dumfries  Branch  of  the  Edin- 
burgh and  Leith  Bank. 

From  this  statement  it  will  appear  that  the  Union  Bank  of  Scotland  em- 
braces the  following  banks  :  — 

1.  The  Glasgow  Union  Bank.    Formed  since  1826. 

2.  The  Paisley  Union  Bank.    No.  23  in  the  first  table. 

3.  Glasgow  Banking  Company.    No.  18. 

4.  Carrick  &  Company,  or  Ship  Bank,  Glasgow.    No.  7. 

5.  Sir  William  Forbes  &  Co.    No.  30. 

6.  Thistle  Bank,  Glasgow.    No.  32. 

7.  Hunters  &  Co.,  Ayr.    No.  19. 

The    Western    Bank    of   Scotland    also    embraces   several  original 
banks : — 

1.  The  Western  Bank  of  Scotland.    Formed  since  1826. 

2.  The  Dundee  Union  Bank.    No.  13. 

3.  Greenock  Banking  Company.    No.  17. 

4.  The  Ayrshire  Banking  Company.    Formed  since  1826. 

The  Edinburgh  and  Glasgow  Bank  is  formed  of  three  banks  :  — 

The  Edinburgh  and  Leith  Bank. 

The  Southern  Bank  of  Scotland,  at  Dumfries. 

The  Glasgow  Joint-Stock  Bank. 

The  banks  that  have  failed  or  wound  up  since  1826  are  the  follow- 
ing:— 

1.  Exchange  and  Deposit  Bank,  Edinburgh.    No.  14. 

2.  Fife  Banking  Company.    In  1825,  No.  16. 

3.  Leith  Banking  Company.    No.  20. 

4.  Renfrewshire  Banking  Company,  Greenock.    No.  28. 

5.  Montrose  Bank.    No.  22. 

6  Perth  Union  Bank.    No  26 

7  Ramsay's,  Bonar's,  &  Co.,  Edinburgh.    No.  27. 

8.  Shetland  Bank.    No.  29. 

9.  Stirling  Bank.    No.  31. 

AA*  317 


A  Trtaiite  on  Banking. 

From  this  account  it  will  appear  that  out  of  the  thirty-two  banks  con- 
in  my  list  of  1826  only  nine  remain.     These  axe  the  following :  — 

I.  Tb*  Bank  of  Scotland.    No.  1. 

r  The  Royal  Bank  at  ScotUnd.    No.  2. 

3.  The  Bri'tuh  Linen  Company.    No.  3. 

4.  The  Aberdeen  Banking  Ciimpnny.     No.  4. 

•onleen  Town  ft  County  Bank.    No.  5. 
6.  Coaunrrvial  Bank  of  S<-otlund.    No.  8. 

•..!.«•  Hanking  <\»iii|nuiy.     No.  10  and  No.  11. 

.uonal  Bank  of  BattWM.     No.  SI. 
».  I'crth  Banking  Company.    No.  25. 

Most  of  the  hanks  that  have  ceased  to  exist  were  banks  having  only  a 
few  partners,  and  their  capital  was  unknown.  The  banks  that  have  since 
been  formed  have  many  partners,  and  generally  a  large  amount  of  capi- 
tal.  It  was  probably  in  consequence  of  the  greater  strength  of  the  new 
banks  that  the  old  ones  found  it  expedient  to  discontinue  business.  The 
change  has  doubtless  been  for  the  advantage  of  the  public,  and  it  has 
taken  place  without  being  attended  with  any  inconvenience  or  excitement. 
Indeed,  we  think  that  in  all  cases  where  the  law  leaves  banking  free,  the 
•Act  is  to  reduce  the  number  of  banks.  We  are  aware  that  the  general 
impression  is  the  reverse. 

**  The  argument  presumes,  that  in  case  of  free  banking  the  number  of 
banks  would  be  very  great  Are  we  justified  in  supposing  that  this  would 
be  the  case  ?  Theory  exclaims,  *  Yes  ' ;  experience  whispers, '  No.'  The 
numerous  banks  in  America  are  not  the  result  of  free  trade,  hut  arc  the  re- 
sult of  the  Acts  of  the  Legislature.  The  State  Legislatures  have  thought 
proper  to  give  a  large  number  of  charters,  and  of  course  there  is  a  large 
number  of  banks.  Had  the  charters  been  fewer,  and  required  higher  paid- 
up  capitals,  the  banks  would  have  been  larger  and  more  respectable.  The 
number  of  banks  in  England,  too,  have  been  the  result  of  the  interference 
of  the  Legislature.  In  the  renewal  of  the  charter  of  the  Bank  of  England 
io  1708  it  was  .enacted,  that  no  other  bank  having  more  than  six  partners 
should  have  the  privilege  of  issuing  notes.  As  the  growing  trade  and 
wealth  of  the  country  required  banks  of  some  sort,  and  as  banks  having 
more  than  six  partners  could  not  be  formed,  a  great  number  of  banks, 
each  not  having  more  than  six  partners,  rose  into  existence  as  they  were 
required  by  the  increasing  trade  and  wealth  of  the  country.  Hence,  in- 
stead of  having  a  small  number  of  large  banks,  we  have  had  a  large  num- 
ber of  small  banks. 

44  If  we  look  to  Scotland,  where  banking  has  been  free,  we  find  that  the 
total  number  of  private  and  joint-stock  banks  is  only  twenty-eight.*  Bank- 
ing has  been  free  beyond  fifty  miles  from  Dublin  for  the  last  fifteen  years, 
yet  throughout  that  district  there  are  only  five  banks  of  issue,  with  the  ex- 
ception of  the  Bank  of  Ireland.  In  England,  where  there  has  been,  as 
we  are  told,  a  frenzy  in  their  favor,  the  joint-stock  banks  of  issue  are 
only  ninety-one,!  and  probably  they  would  have  been  less  numerous  had 

•  Thii  wa§  written  in  the  year  1 840.    The  present  reduced  number  of  bank*  »trength. 
•  -  -     .    i  - .     •    -  • 
t  At  prwent,  tuctj-dx. 

318 


Failures  of  Scotch  Banks. 

not  the  law  excluded  them  from  London.  The  capital  which  has  been 
embarked  in  a  number  of  small  local  banks  would  have  been  invested  in 
large  London  establishments,  and  the  place  of  the  local  banks  would  have 
been  occupied  by  branches  of  the  London  banks.  From  these  facts,  it 
seems  fair  to  infer  that  some  of  the  small  joint-stock  banks,  and  many  of 
the  private  banks,  will  in  the  course  of  the  next  twenty  years  be  merged 
in  larger  establishments.  The  supposition  that  unlimited  freedom  of  bank- 
ing would  lead  to  the  establishment  of  an  inconvenient  multitude  of  banks 
is  wholly  unsupported  by  the  testimony  of  experience."  (Currency  and 
Banking,  by  J.  W.  Gilbart.) 

The  existing  banks  in  Scotland  are  thus  distributed  :  — 

Edinburgh  is  the  head-quarters  of  the  following  banking  institutions  :  — 

1.  The  Bank  of  Scotland.  4.  The  Commercial  Bank  of  Scotland. 

2.  The  Royal  Bank  of  Scotland.  5.  The  National  Bank  of  Scotland. 

3.  The  British  Linen  Company.  6.  The  Edinburgh  and  Glasgow  Bank. 

All  these  banks  issue  notes,  and  have  branches.  The  first  five  have 
charters.  The  charters  of  No.  4  and  No.  5  are  comparatively  of  recent 
date,  and  do  not  limit  the  liability  of  the  shareholders. 

The  Exchange  Bank  of  Scotland  :  —  This  bank  has  a  charter  under 
the  Act  of  1844  (7  &  8  Viet.  c.  32).  It  does  not  issue  notes,  and  has  no 
branches. 

Glasgow  is  the  head-quarters  of  the  following  banks  :  — 

1.  The  Union  Bank  of  Scotland.  3.  The  Clydesdale  Bank. 

2.  The  Western  Bank  of  Scotland.  4.  The  City  of  Glasgow  Bank. 

The  North  British  Bank,  at  Glasgow,  does  not  issue  notes,  and  has  no 
branches.  Its  capital  has  been  reduced  from  .£233,270  to  £  156,520  by 
the  purchase  of  its  own  shares.  These  purchases  have  been  carried  to  the 
"  Reserved  Fund  Account." 

Dundee  is  the  head-quarters  of  three  banks,  Aberdeen  of  three,  Perth 
of  two,  and  Inverness  of  one.  All  the  other  places  in  Scotland  have  only 
branches.  Branches  of  other  banks  are  also  established  in  Edinburgh, 
Glasgow,  Dundee,  Aberdeen,  Perth,  and  Inverness,  besides  the  banks 
whose  head  offices  are  in  those  places. 

III.  —  A  Comparison  between  the  Banks  of  Scotland  and  those  of  Eng- 
land. 

The  differences  between  the  English  and  the  Scotch  banks  are  the  fol- 
lowing :  — 

1.  The  Scotch  banks  are  all  joint-stock  banks.      In  England  there  is  a 
mixture  of  joint-stock  and  private  banks. 

2.  The  Scotch  banks  are  nearly  all  banks  of  issue.     In  England  there 
are  many,  both  private  and  joint-stock  banks,  that  are  not  banks  of  issue. 

3.  The   Scotch  banks  generally  have  branches.     In  England  most  of 
the  private  banks,  and  some  of  the  joint-stock  banks,  have  no  branches. 

4.  The  Scotch  banks  universally  grant  interest  on  the  balance  of  cur- 
rent accounts,  —  a  practice  not  universally  adopted  in  England,  especially 
in  London. 

319 


A  Treatise  on  Banking. 

ft.  The  mode  of  making  advances  by  way  of  "  cash  credit "  is  general 
in  Scotland,  but  very  rare  in  England. 

\\  •  i nay  also  observe  some  other  differences,  chiefly  of  a  business 
character,  which  have  nn  iinj»ortant  bearing  on  the  interest  of  the  commu- 
nity. 

1.  The  banks  of  Scotland  have  generally  a  large  paid-up  capital. 

•*  Two  great  error*  appear  to  hare  been  committed  in  the  formation  of  joint-stock 
tank*  in  England,  and,  until  theM  are  remedied,  such  establishments  can  hanlly  ex- 
jirrt  to  rrarh  a  higher  degree  of  importanre  or  credit  than  is  attainable  by  u  wealthy 
private  bank.  Tbeee  erOs  are,  in  the  first  place,  too  small  a  capital  relatively  to  the 
extevt  of  btttinew  undertaken ;  and,  in  tlic  next  place,  the  circ umsuincc  of  the  is- 
•aee  of  the  joint-clock  banks  being  left  uncontrolled  by  any  effective  •ystcm  of  ex- 

"Tilt  advantage  of  a  small  capital  in  banking  is.  that  it  enables  the  establishment,  if 
at  all  racreuful  in  busine**,  to  pay  a  large  dividend.    The  profits  of  hanking  dcj  .•]..! 
fa  a  great  measure,  on  the  amount  of  deposits  and  circulation,  and  according  as 
than  are  great  or  email  compared  with  the  extent  of  the  capital,  «ill  the  company  be 
enabled  to  diride  a  larger  or  smaller  dividend.     It  then-fun-  heroines  the  «!ivi<iu.s  pol 
icy  of  Uxwe  establishmeata,  the  managers  of  which  conceive  that  the  success  of  a  bank 
U  proved  by  the  early  payment  of  a  high  dividend,  to  keep  the  capital  of  the  company 
within  the  narrowest  possible  limits.     Thi*  -\-tcm  has  been  carried  to  thi-  utmost  ex- 
treme in  England;  and  hence,  although  large  dividends  have  been  paid  to  the  .-h:m- 
holders,  there  hai  been  no  corresponding  increase  of  confidence  on  the  pan  of  the 

; :;  :  ' 

"  The  Scotch  banks,  on.  the  other  hand,  have  pursued  a  directly  opposite  course. 
Their  object  has  been  to  secure  public  confidence  by  the  extent  of  their  capital,  and 
they  have  continued  to  pay  moderate  dividends  to  their  shareholders,  until  iuon.-d  in 
augmenting  them  by  years  of  success,  and  a  large  accumulated  sinking-fund.  So  well, 
indeed,  is  this  system  understood,  and  so  completely  has  it  attained  its  purposes,  that 
the  sligheat  appearance  of  improvidence  displayed  by  a  Scotch  joint-stock  bank,  in  fix- 
ing the  amount  of  its  dividend,  has  been  invariablv  attended  with  a  decrease  of  the  pub- 
lic confidence  in  the  stock  of  the  establishment.  In  this  manner  public  confidence  has 
been  secured,  the  value  of  Scotch  bank  stock  has  risen  in  the  market,  nnd  the  share- 
holders have  received  their  extra  profits  as  a  Lonus,  or  in  the  increased  value  of  their 
ova  shares.  Thus,  instead  of  being  looked  upon  as  establishment.-*  aiming  at  the 
ephemeral  advantage  of  making  a  large  dividend,  for  stock-jobbing  or  temporary  pur- 
•OMB.  oar  banks  have  almost  invariably  assumed  the  character  of  permanent  national 
identified  with  the  prosperity  of  the  country,  and,  by  means  of  their 
i,  conferring  benefit  on,  as  well  as  obtaining  the  confidence  of,  ev- 


enr  class  in  the  communitv."  (Letter  to  James  William  Gilbart.  Ksu..  on  the  Relative 
*writa  of  the  English  and  Scotch  Banking  Svstcms  ;  with  1'nu  tical  Su  —  .  -'ions  for 
the  Consolidation  of  the  English  Joint-stock  Banking  Interest.  l$y  Robert  Ik  U.  —  Mr. 
Bell  is  now  manager  of  the  City  of  Glasgow  Bunk,  at  Edinburgh';  and  \\a-  examined 
in  IMS,  a*  a  witneai  baton  the  Committee  of  the  House  of  Commons  on  Commercial 


The  eighteen  banks  in  Scotland  have  a  paid-up  capital  of  £  11,912,130, 
making  an  average  to  each  bank  of  £  66 1 ,785.  The  number  of  places  of 
iMK  (banks  and  branches)  is  403,  making  an  average  of  capital  to  each 
place  of  .£29,558.  The  authorized  circulation  for  Scotland  is  ,£3,0b7,209, 
making  an  average  to  each  place  of  issue  of  £  7,660. 

The  ninety-nine  joint-stock  banks  of  England  have  a  paid-up  capital  of 
about  £  14,000,000,  making  an  average  to  each  bank  of  about  £  140,000. 
The  joint-stock  banks  and  branches  in  England  are  513,  making  an 
average  of  capital  to  each  place  of  about  ^"27^90. 

The  «urty-«x  joint-stock  banks  of  issue  in  England  have  a  paid-up  cap- 

00 


Comparative   View. 

ital  of  about  £  6,000,000,  making  an  average  capital  of  about  ,£91,000. 
The  number  of  places  of  issue,  banks  and  branches,  is  407,  making  an 
average  of  capital  to  each  place  of  about  £  15,000.  The  authorized  is- 
sue is  £  3,409,987,  making  an  average  of  about  £  8,378  to  each  place  of 
issue. 

There  are  184  private  country  banks  in  England,  issuing  notes  at  375 
places.  Their  authorized  issue  is  ,£4,822,488,  making  an  average  to 
each  bank  of  £  '26,200,  and  of  £  12,860  to  each  place  of  issue.  The 
capital  of  these  banks  is  unknown. 

2.  In  operating  on  his  current  account,  it  is  not  the  general  practice  in 
Scotland  for  a  customer  to  draw  cheques  on  the  bank  for  his  individual 
payments,  nor  to  accept  bills  payable  at  the  bank.  If  he  has  to  make 
twenty  payments  in  the  course  of  the  day,  he  will  go  to  the  bank  in  the 
morning,  and  draw  out  in  one  sum  a  sufficient  amount  of  notes  to  make 
all  these  payments.  On  the  other  hand,  if  a  customer  should  receive 
money  from  twenty  different  people  in  the  course  of  the  day,  he  will 
not  receive  cheques,  as  there  are  none  in  circulation,  but  bank  notes, 
which  at  the  close  of  the  day  he  will  pay  in  one  sum  into  the  bank.  In 
England,  all  these  receipts  and  payments  would  be  made  in  cheques,  each 
having  probably  odd  shillings  and  pence.  From  this  cause,  the  trouble 
and  expense  to  a  bank  of  conducting  a  current  account  is  much  greater  in 
England  than  in  Scotland. 

A  few  years  ago  an  attempt  was  made  to  form  a  bank,  to  be  called  the 
Dunedin  Bank  of  Scotland.  One  of  the  advantages  it  held  out  to  the 
public  was  the  adoption  of  the  English  system  of  drawing  cheques  for 
individual  payments.  The  advantages  of  this  system  are  pointed  out  in 
the  following  terms :  — 

"  Another  prominent  feature  of  the  proposed  institution  is  the  proposal  to  take  in 
and  pay  out  for  customers  'any  sum,  however  small.'  Though  troublesome  to  the 
bank,  such  a  measure  must  be  of  incalculable  convenience  to  parties  dealing  with  it. 
Here,  again,  there  is  nothing  absolutely  new,  as  such  a  practice  must,  more  or  less,  ex- 
ist wherever  there  are  cash  accounts,  forming,  as  it  does,  the  essential  element  of 
these  transactions.  In  the  Dunedin  Bank  it  is  intended  to  extend  the  principle  to  its 
widest  limit ;  in  which  case  only  its  fullest  benefits  can  be  felt.  Most  banks  are  un- 
willing to  arrange  transactions  of  trifling  amount,  and,  in  consequence,  their  customers 
cannot  follow  up  any  determinate  method  of  settling  their  accounts  in  that  way. 
Without  a  universal  and  indiscriminate  system  of  payment,  however  inconsiderable 
they  may  be,  it  is  obvious  that  the  practice  of  honoring  larger  drafts,  —  and  those  only 
for  sums  of  so  many  pounds  in  exact  number,  —  the  operation  of  settling  accounts  in 
this  manner  is  at  best  of  a  mixed  description,  and  does  not  afford  the  whole  advantages 
to  be  derived  from  it.  Were  the  principle  adopted  in  its  full  extent,  the  bank  would, 
in  reality,  become  general  cashier  for  their  customers;  and  the  necessity  of  having 
money  in  hand  for  the  purpose  of  meeting  every-day  expeases  would  be  in  a  great 
measure  superseded.  A  larger  portion  of  funds  would  be,  consequently,  in  deposit, 
bearing  interest,  and,  at  the  same  time,  as  ready  for  use  as  if  in  the  coffer  or  pocket- 
book  of  its  owner.  By  this  means,  likewise,  a  regular  journal  of  receipt  and  expendi- 
ture would  be  carried  on  without  the  slightest  trouble  on  the  part  of  the  individual 
concerned,  who,  at  the  end  of  the  year,  or  of  the  periodical  balancing  of  accounts, 
would  find  an  authentic  record  of  his  ordinary  transactions.  Here,  too,  he  would  find 
the  vouchers  for  the  payments  he  had  made ;  and  would  be  under  no  apprehension  of 
being  called  upon  in  repetition  of  payment  through  any  loss  of  his  receipts.  To  in- 
sure accuracy,  both  in  regard  to  small  cash  payments  and  calculations  of  interest,  it  is 
contemplated  to  institute  a  farthing  column  in  the  books  of  the  Dunedin  Bank,  in  or- 
der that  sums  may  be  computed  with  greater  minuteness  and  precision.  As  much 

321 


A  TViMtiM  on  Banking. 


hMmvstbVjce  and  trouble  will  be  necessarily  incurred  t>y  the  adoption  of  this  plan,  it 
is  proposed  to  meet  the  additional  expense  by  a  small  tax  upon  the  tranwu-iion-.  them- 
•elves;  and  it  is  calculated  that  the  trifling  «niiini-.ion  of  a  halfpenny  up.>u  t  .t.  h  .-in. 
neat  and  entry,  or  4*.  %/•  npon  the  hundred,  will  uili-i.l  Miilirient  irtiitineruiuni 
•crease  of  labor.  Should  this  fee  be  found  too  small  to  n-mtiin T.U. 


CJSK 


M  MM  falcroaac  of  labor.  Should  thin  fee  be  found  too  small  to  i-eninip-i.ite.  m-  to 
«ard  svftcimtly  against  the  abuse  of  the  privilege,  it  will,  of  mur-e.  !„• .  n«\  fur  the 
aak  to  increa«e  the  charge,  —  say  to  one  penny,  or  more,  on  each  trama< 


8.  TW»  system  of  numerous  branches  leads  to  uniformity  all  over  Scot- 
land in  the  terms  on  which  business  is  transacted  in  the  banks. 

From  the  small  number  of  banks  that  existed  for  many  years  in  Scot- 
land, and  from  the  circumstance  that  the  liead  offices  of  most  of  these 
banks  were  fixed  at  Edinburgh,  it  was  easy  for  them  to  form  arrange- 
•*  among  themselves  for  the  regulation  of  their  business.  Hence 
arode  a  uniformity  of  practice  among  all  the  banks,  and  throughout 
the  whole  of  Scotland. 

Ttits  uniformity  of  practice  does  not  e*tet  in  England.  The  system 
of  London  banking  is  different  from  that  in  the  country.  And  tin:  kink- 
ing of  one  district  differs  from  that  of  another  district.  It  would  be  diffi- 
cult to  produce  any  general  union  in  England,  even  among  the  joint-stock 
banks.  There  is  a  difference  in  the  character  of  their  localities.  Tli<  ir 
head  offices  are  too  wide  apart  to  admit  of  frequent  personal  communica- 
tion. And  it  may  be  feared  that  among  the  joint-stock  banks  of  England 
there  is  not  enough  of  that  esprit  du  corps  which  is  essential  to  the  < 
ence  of  a  general  confederation. 

There  is,  however,  considerable  competition  among  the  banks  of  Scot- 
land. This  rivalry,  however,  does  not  lead  to  transacting  business  on 
lower  terms.  Indeed  these  terms  are  always  very  moderate.  The  dif- 
ference between  the  rate  of  interest  allowed  and  charged  is  rarely  more 
than  one  per  cent  No  commission  is  charged  on  current  accounts  ;  and 
it  is  only  recently,  we  believe,  that  commission  has  been  charged  on  the 
amount  (not  the  operations)  of  cash  credits.  Sometimes  the  banks  at 
Glasgow,  when  there  is  a  great  demand  for  capital,  have  been  disposed 
to  grant  a  higher  rate  of  interest  than  the  banks  of  Edinburgh.  But  this 
difference  has  soon  been  arranged.  The  provincial  banks,  too,  have  car- 
ried on  a  strong  opposition  against  the  branches  of  the  Edinburgh  banks. 
The  late  Thomas  Kinnear,  Esq.,  when  asked  what  had  led  to  the  discon- 
tinuing of  some  branches  of  the  Bank  of  Scotland,  replied  :  — 


•  With  respect  to  those  that  are  beyond  ray  memory,  I  cannot  say  what  was  the 
dtese;  bat  those  that  hare  been  given  up  within  my  rc<oll«  tion,  in  point  of  fact, 
wen  firen  up  in  consequence  of  the  town  in  which  that  l>ran«  h  hud  originally  been 
artahCslud  baring  accumulated  wealth  to  such  a  degree,  that  it  could  afford  a  hank- 
tag  capital  of  ita  own,  and  that  it  had  in  point  of  fact  established  a  local  bank,  then 
the  connection  of  that  local  bank  went  so  strongly  against  us  l>y  fair  competition,  that 
we  (band  we  roald  employ  oar  capital  to  better  purpose  el&cwherc,  and  gave  up  the 
braaeh."  (ChnHM,  132,  Kinnear.) 

4.  The  system  of  numerous  branches  enables  the  banks  of  Scothm'l  to 
transfer  the  surplus  capital  of  the  agricultural  districts  to  the  manufactur- 
ing and  commercial  districts,  without  going  through  the  process  of  re- 
discounting  their  bills. 

Some  Scotch  writers  have  considered  it  a  reproach  to  the  English 


Comparative  View. 

banks  that  they  re-discount  their  bills,  and  have  boasted  that,  with  rare 
exceptions,  the  practice  of  re-discount  is  unknown  in  Scotland.  The  ac- 
cusation is  made  without  due  consideration.  The  system  of  branches 
makes  a  difference  in  all  banking  arangements.  A  bank  in  an  agricul- 
tural district,  say  at  Norwich,  has  a  superabundance  of  money.  A  man- 
ufacturing town,  say  Manchester,  has  a  demand  for  money.  The  bank 
at  Norwich  will  send  its  money  to  a  bill-broker  in  London.  The  bank  at 
Manchester  will  send  its  bills  to  the  same  broker.  A  re-discount  takes 
place.  But  let  us  suppose  that  the  bill-brokering  establishment  should  be- 
come the  head  office  of  a  large  bank,  having  one  branch  at  Norwich,  and 
another  at  Manchester.  Then  no  re-discount  will  occur.  The  bills  dis- 
counted at  Manchester  will  never  pass  out  of  the  possession  of  the  bank. 
Nevertheless,  the  surplus  funds  at  Norwich  will  be  transferred  to  meet 
the  wants  of  Manchester  as  effectually  as  before.  This  is  an  illustration 
of  the  branch  system  in  Scotland.  A  bank  at  Edinburgh  will  have 
branches  in  both  the  agricultural  and  the  manufacturing  districts.  Or  a 
bank  whose  head  office  is  in  a  manufacturing  town,  will  have  branches  in 
the  agricultural  districts.  Thus  the  surplus  funds  of  Perth,  Ayr,  and 
Dumfries,  are  speedily  transferred  to  be  employed  at  Glasgow,  Paisley, 
and  Dundee.  Were  a  bank  to  be  established  at  Glasgow,  without  branch- 
es, it  would  probably  have  occasion  for  discount  at  certain  times,  as  well 
as  the  banks  at  Manchester  or  Leeds. 

At  the  same  time,  we  think  this  transfer  of  capital  by  means  of 
branches  is  better  than  by  means  of  re-discount.  There  is  no  occasion 
for  the  intermediate  party,  the  bill-broker.  The  J>ills  do  not  go  out  of  the 
bank,  so  that  men's  transactions  do  not  become  known.  The  abuses 
connected  with  re-discount  by  fictitious  bills  are  effectually  prevented ; 
and  the  bank  can  more  readily  regulate  its  advances  in  accordance  with  its 
means.  To  recur  to  our  illustration  :  —  The  bank  at  Norwich  may  lose  a 
large  amount  of  its  deposits ;  the  bank  of  Manchester,  knowing  nothing 
of  this,  may  continue  its  advances  in  dependence  upon  receiving  its  usual 
re-discount.  The  check  may  at  length  come  so  suddenly  that  the  Man- 
chester bank  may  be  placed  in  difficulty.  Under  the  branch  system, 
should  any  large  amount  of  deposits  be  withdrawn  from  one  branch,  the 
bank  would  immediately  limit  its  advances  at  the  others.  The  advantage 
of  this  system  on  the  approach  of  a  pressure  is  obvious. 

5.  The  system  of  numerous  branches  leads  to  more  regularity  and 
uniformity  in  the  mode  of  making  their  exchanges  :  — 

"  The  system  of  exchanges  centres  in  Edinburgh.  In  that  city  a  general  exchange 
of  the  bank  notes  of  all  the  banks  of  issue  in  Scotland  takes  place  twice  a  week.  This 
exchange  is  made  alternately  within  the  office,  and  under  the  superintendence  of  the 
Bank  of  Scotland  and  of  the  Royal  Bank.  On  these  exchange  days,  clerks  from  all 
the  banks  having  establishments  in  Edinburgh  assemble,  bringing  with  them  the  notes 
which  each  bank  has  collected,  not  only  in  Edinburgh,  but,  by  means  of  their  branch- 
es, all  over  the  country ;  and  as  the  Edinburgh  banks  act  as  agents  for  the  several 
provincial  banks,  and,  as  such,  exchange  or  give  value  for  their  notes,  the  whole  bank- 
ing interest  of  Scotland,  so  far  as  concerns  the  exchange  of  notes,  is  represented  in 
the  '  Cleariiig-roam.' 

"  On  these  occasions  a  mutual  exchange  is  made  by  the  several  clerks  assembled, 
giving  the  notes  of  other  banks  which  they  hold,  and  taking  their  own  in  exchange. 
After  this  exchange  of  notes,  a  balance  is  struck,  and  each  clerk  hands  over  to  the  offi- 

323 


A  Treatise  on  Banking. 

»  statement,  showing  the  amount  of  the  Iwlanr™  as  between 
of  the  other  eMiiMMuncnts.     The  aggregate  balance  on  this 
shows  the  remit  of  the  day1*  exchange  as  it  affects  each  Tiank  ;  ami  (hat  bid- 
will  be  for  or  against  any  given  bank  in  the  precise  proportion  in  win.  h  n- 


i  have  oioeniied  or  fallen  short  of  its  emerging  and  available  resources. 

-  The  ultimate  balance  against  every  bank  was  formerly  paid  by  a  draft  on  J/.mlon 
at  ten  days'  daw.    Bat  this  mode  of  settlement  having  Urn  found  Inconvenient,  and 

having  on  one  occasion  led  to  considerable  lo»».  in  ...:,-,  ,|U'  i..,-  of  the  i.niiu.  of  a  pri- 
vate bank  in  Edinburgh,  a  different  arrangement  won  then  made,  and  is  now  acted 
upon.  Acconimsr  to  that  arrangement,  every  Scotch  bank  of  issue  having  an  estab- 
lishment m  Edinburgh  is  bound  to  bold  a  certain  </m</i<  of  jLl.ouu  exchequer  hills 
TbU  fusts  k  proporuoned  to  the  average  circulation  of  the  particular  bunk  ;  ami  with 
•  .-.j-.n-r  l.i IN  the  balance*  of  exchange  are  paid,  the  fnu-tional  part*  of  JL  i  ."<  ,, 

t  sealed  by  £  100  Bank  of  England  notes  or  gol.l. 

u  the  object  of  this  system  is  to  oblige  each  Imnk  to  hold  a  certain  amount  of 
Mi  Government  paper  to  meet  any  fluctuation  and  excess  in  its  issues,  the  several 
arc  further  bound,  under  the  general  exchange  arrangement,  to  sell  or  to  buv 
«juer  bills  to  or  from  each  other  whenever  the  number  of  hills  which  any  one  bank 
holds  exceeds  one  third,  or  falls  short  in  the  same  proportion,  of  the  conventional  quota. 
These  purchases  and  sales  of  e\.  he.,uer  Lills  made  from  and  to  the  banks  reciprocally 
are  settled  for  by  the  bank  making  the  purchase,  by  a  draft  on  London  at  five  days' 
date,  with  a  commission  equivalent  to  the  eight  days  which  the  draft  has  to  run  at  the 
exchequer  bill  rale  of  interest.  In  order  to  prevent  the  risk  of  thoc  mutual  sales  and 
purchases  of  exchequer  bills  being  converted  into  stock-jobbing  transactions,  the  pur- 
chase* are  made  at  par,  and  each  bank  holds  its  quoin,  in  its  own  name,  direct  ti<  ia 
Government,  while  the  general  supply  of  exchequer  bills  is  kept  in  the  circle  by  being 
specially  marked  as  '  Edinburgh  Exchange  Erchfautr  Hills: 

'•  Still  further  to  complete  the  control  of  the  banking  interests  over  these  exchange 
arrangements,  a  statement  is  produced  by  each  bank  on  every  exchange  day,  si... 
the  amount  of  exchequer  bills  which  it'liolds.  And  it  is  only  necessary  to  add,  that 
these  exchange  regulations,  which  have  been  found  so  salutary  in  practice,  are  the  re- 
sult of  mutual  and  voluntary  concert  amon^  nil  the  banks;  and  although  it  may  Li- 
said  that  they  are  not  compulsory,  yet  in  effect  they  are  so,  since  any  bank  of  issue  re- 
fusing to  accede  to  them  would  incur  the  risk  of  having  its  notes  refu>cd  by  the  com- 
bined banks,  which  in  Scotland  would  be  tantamount  to  a  suppression  of  the  non-ac- 
ceding bank  as  a  bank  of  issue, 

tt  In  addition  to  these  exchanges  in  Edinburgh,  there  are  also  exchanges  made  on 
the  same  days  in  Glasgow ;  and  the  balances  being  advised  by  post  to  K<lml-ur-h.  arc 
settled  for  next  morning  in  the  same  manner  by  exchequer  bills  and  Bank  of  England 
notes.  So  also,  in  order  to  save  the  trouble  and  risk  of  transmitting  to  Edinburgh  or 
to  Glasgow,  notes  collected  by  the  different  agents  in  the  country,  wherever  there  are 
two  or  more  branch  banks  in  'the  same  town,  their  managers  or  agents  exchange  notes. 
and  advise  the  state  of  balances  to  Edinburgh,  when  they  are  included  in  the  next  en- 
amjswgeoeral  exchange. 

*  vvutt  I  have  now  said  mav  be  sufficient,  without  going  into  further  detail,  to  give 
a  general  idea  of  our  svstcm  of  exchanges.    The  Scotch  banking  interests  have  Lcen 
mainly  indebted,  it  is  believed,  for  the  complete  organization  of  this  system,  to  Mr. 
Blair,  the  Treasurer  of  the  Bank  of  Scotland,  one  of  the  most  talented  of  onr  Scotch 

ken;  and  although  in  description  it  may  appear  complicated,  nothing  can  be  sim- 
•  or  more  satisfactory  than  its  operation  in  practice  ;  nor  can  any  check  be  more 


The  Scotch  bankers  are  loud  in  their  praises  of  the  system  of  ex- 
change*. And  justly  so.  But  they  are  In  error  when  they  suppose  that 
nothing  like  it  exists  in  England.  We  have  shown  that  the  country  banks 
make  their  exchanges  with  each  other,  and  pay  the  difference  by  a  draft 
on  London.  These  operations  liave  the  same  effect  as  the  exchanges  in 
Scotland  of  withdrawing  from  circulation  all  the  superfluous  notes  ;  that  ia 

*  Tbe  Letter,  already  quoted,  addressed  to  me  by  Mr.  BelL 


Comparative  View. 

ic  say,  all  the  notes  that  come  into  the  hands  of  the  bankers.  If  it  be 
true  that  notes  remain  out  longer  in  circulation  in  England  than  in  Scot- 
land, it  arises  not  from  any  difference  in  the  system  of  exchanges,  but 
from  a  difference  in  the  habits  of  the  people  with  regard  to  "  keeping  a 
banker."  If  a  Scotch  banker  issue  £  1,000  of  notes,  in  the  morning,  he 
feels  assured  that  these  notes  will  be  paid  into  some  other  bank  in  the 
course  of  the  day.  An  English  banker  is  not  so  sure.  The  party  may 
not  "  keep  a  banker,"  and  he  may  then  lock  up  the  notes  in  a  strong  box 
for  a  week  or  ten  days,  until  he  have  occasion  to  make  a  payment.  We 
think  it  desirable  that  every  man  who  has  money  should  lodge  it  in  a 
bank,  not  merely  for  interest,  but  for  security  ;  and  therefore  we  approve 
of  the  Scotch  practice.  But  it  is  this  universal  practice  of  having  a  banker, 
and  not  merely  the  system  of  exchanges,  that  withdraws  notes  so  rapidly 
from  circulation. 

At  the  same  time,  it  should  be  stated  that  the  Scotch  bankers  are  of 
opinion  that  our  system  of  banking  in  England  -is  chargeable  with  some 
portion  of  the  blame.  They  say  that  as  the  English  banks  do  not  univer- 
sally allow  interest  on  deposits  and  current  accounts,  the  people  have  not 
the  same  inducement  as  in  Scotland  for  placing  their  money  in  a  bank. 
And  as  many  banks  charge  commission  on  the  operations  of  a  current  ac- 
count, it  is  the  interest  even  of  those  who  keep  bankers  to  pay  away  the 
notes  they  receive  to  other  parties,  rather  than  to  lodge  them  to  their  credit 
with  their  banker.  On  this  subject  I  may  quote  the  following  extract 
from  the  second  letter  addressed  to  me  by  Mr.  Bell.  (A  Letter  to  J. 
W.  Gilbart,  Esq.,  on  the  Regulation  of  the  Currency  by  the  Foreign  Ex- 
changes, and  on  the  Appointment  of  the  Bank  of  England  to  be  the  sole 
Bank  of  Issue  throughout  Great  Britain.  By  Robert  Bell.) 

"In  Scotland  we  have  adopted  every  means  to  concentrate  the  resources  of  the  .coun- 
try in  the  hands  of  the  banker.  We  allow  a  liberal  rate  of  interest  on  deposits,  while 
we  not  only  encourage  small  capitalists  and  traders  to  open  accounts  with  us,  but  we 
induce  our  customers  to  make  frequent  operations  on  their  accounts,  and  the  result  is 
that  every  superfluous  bank  note  is  rapidly  returned  upon  the  issuer.  The  very  oppo- 
site course  is  pursued  in  England  ;  you  allow  no  interest  on  deposits,  you  give  no  en- 
couragement to  small  depositors,  while  you  put  a  barrier  in  the  way  of  your  customers 
making  frequent  operations,  by  the  charging  a  commission  on  the  debit  side  of  their 
accounts ;  the  consequence  of  which  is.  that  not  only  your  paper  but  your  gold  curren- 
cy stagnates  in  the  hands  of  the  public  during  times  of  prosperity,  leaving  the  paper 
issues  to  be  poured  back  upon  the  issuers  in  seasons  of  adversity,  thus  aggravating  in 
no  slight  degree  the  severity  of  monetary  pressures." 

Even  were  the  keeping  of  a  banker  as  general  in  England  as  in  Scot- 
land, the  same  system  of  exchanges  could  not  be  adopted.  The  Scotch 
system  requires  an  equality,  or  an  approach  to  it,  among  the  several 
banks ;  that  the  head  offices  of  these  banks,  generally,  should  be  in  the 
capital ;  and  that  the  banks  should  have  numerous  branches  throughout 
the  country.  These  circumstances  do  not  exist  In  England.  And,  more- 
over, we  have  the  Bank  of  England,  whose  notes  are  a  legal  tender.  It 
is  obvious  there  can  be  no  exchange  of  notes  in  places  where,  as  in  Lon- 
don, there  is  only  one  bank  of  issue.  But  the  exchanges  between  English 
country  banks  are  precisely  upon  the  same  principle  as  those  in  Scotland, 
and  have  similar  effects.  The  differences  are  paid  by  drafts  on  London, 
payable  on  demand  ;  and  these  drafts  again  pass  through  the  clearing. 
BB  325 


A  Trcatuc  on  Banking. 

i 

Another  advantage  ascribed  to  the  Scotch  system  «>f  exchanges  is,  the 
surveillance  which,  by  this  means,  the  lurgo  banks  at  Edtobiugn  are  al.le 
to exercise  over  the  smaller  (Minks  in  the  provinces.  That  iliis  surveil- 
lance exists  in  Scotland,  and  that  it  hns  been  exercised  beneficially,  we 
entertain  no  doubt  It  is  equally  true  that  such  a  surveillance  does  not 
exist  in  England.  Hut  the  system  of  exchanges  is  not  the  cause  of  this 
surveillance,  it  is  m-  r<-ly  the  instrument.  In  Scotland,  the  bunks  being 
few,  and  all  their  hend  olliccs  l>eing  at  Edinburgh,  they  are  aide  t..  confer 
together,  and  to  fix  on  rules  for  their  general  government.  \\  iih  any  in- 
ferior hunk  that  refuses  to  comply  with  these  rules  they  can  refuse  t. 
change  note*,  ami  thus  force  it  to  compliance.  In  England,  where  tin- 
banks  are  numerous,  and  where  their  head  otlices  are  distant  from  each 
other,  such  a  system  cannot  well  In-  formed  ;  and  hence  each  bunk  is  free 
from  the  control  of  other  banks,  and  may  pursue  any  course  it  pleases, 
however  injurious  to  itself  or  to  others,  so  long  as  it  is  able  to  make  good 
its  payments  to  the  public.  The  banks  at  Edinburgh,  too,  by  means  of 
their  numerous  branches,  have  the  earliest  information  of  any  irregular 
practice  that  may  have  beert  adopted  by  a  local  bank  in  the  provinces ; 
but  the  large  banks  in  London  have  comparatively  but  a  very  imperfect 
knowledge  of  the  operations  of  either  the  private  or  the  joint-stock  banks 
that  nre  scattered  over  the  country. 

From  a  want  of  this  surveillance,  banks  in  England  have  curried  on 
business  for  years  after  they  have  been  supposed  to  be  insolvent.  Hence 
they  have  gone  on  until  their  losses  have  not  only  absorbed  the  whole  of 
tlieir  capital,  but  have  required,  to  replace  them,  further  demands  to  a  large 
amount  from  their  shareholders.  In  Scotland,  these  hunks,  if  they  could 
not  be  kept  in  the  right  path,  would  probahly  Iwive  been  compelled  to  stop 
before  they  had  wandered  so  widely.  Banks,  as  we  have  seen,  do  some- 
times fail  in  Scotland,  but  never  under  circumstances  that  shake  the  pub- 
lic confidence  in  the  general  banking  institutions  of  the  country. 

6.  The  confidence  placed  in  the  banks  of  Scotland  by  the  public  ren- 
ders  them  IBM  exposed  to  inconvenience  during  a  season  of  pressure. 

When  a  pressure  takes  place  in  England,  the  first  objects  of  suspicion 
are  the  banks.  People  that  have  money  in  their  banker's  hands  draw  it 
out  and  hoard  it.  The  bankers,  knowing  that  they  are  liable  to  these  de- 
mands, draw  in  their  funds,  and  make  provision  accordingly-  Hence  the 
capital  of  the  country  is  rendered  dormant  at  the  time  when  it  is  most  re- 
quired to  be  in  a  state  of  activity.  Bunks  that  issue  notes  are  more  liable 
than  others  to  these  sudden  demands.  But  no  such  feeling  exists  at  ; 
ent  in  Scotland.  And  should  the  Act  of  1845  have  the  effect  of  inoculat- 
ing the  people  with  the  love  of  gold,  and  by  this  means  place  the  banks 
in  the  same  position  during  a  pressure  as  the  banks  of  England,  it  must 
be  regarded  as  a  national  calamity. 

On  this  subject,  we  again  quote  from  the  letter  of  Mr.  Bell :  — 

"  Nor  are  these  benefit*,  great  as  they  arc,  the  only  advantages  which  we  hare  de- 
rived from  ear  syttetn  of  banking.  Our  one-pound  notes  connect  and  familiarize  every 
•rtMn  and  laborer  in  the  country  with  our  banking  establishment*  ;  and  the  implicit 
confidence  ia  oar  paper  currency,  thu*  created  and  perpetuated  by  the  general  expc- 
lirncc  of  the  sufficiency  of  our  bankx,  has  on  many  occasions  torn  remarkably  illus- 
trated. It  U  no  exaggeration  to  say,  that  at  this  moment  nine  tenths  of  the  laboring 

3)46 


Currency  in  Scotland. 

classes  of  Scotland,  if  they  had  their  choice,  would  prefer  a  one-pound  note  to  a  sov- 
ereign ;  and,  as  a  consequence  of  this  feeling  of  security,  combined  with  a  sense  of  the 
other  advantages  of  the  system,  no  one  in  Scotland  can  have  forgotten  the  truly  na- 
tional stand  on  behalf  of  our  currency,  whicli  was  made  by  rich  and  poor  in  the  year 
1825,  when  your  English  economists  proposed  to  visit  us  with  an  injury  similar  to  that 
which  was  in  that  year  inflicted  on  England. 

"  With  banking  establishments  thus  preeminently  possessed  of  national  confidence, 
no  mercantile  convulsion  has  hitherto  created  any  general  run  on  our  great  joint-stock 
banks.  It  has  been  otherwise  in  England,  where,  in  consequence  of  legislative  enact- 
ments, the  public  have  been  taught  to  regard  gold  and  silver  as  the  only  representatives 
of  value.  The  bond  of  union  between  the  banks  and  the  mass  of  the  people  has  thus 
"been  severed ;  and  when  a  monetary  crisis  occurs,  its  consequences  are  incalculably 
more  injurious.  With  us  (though  very  rarely),  runs  have  been  occasionally  made  on 
particular  banks ;  but  it  has  been  merely  to  withdraw  a  deposit  from  one  bank  to  place 
it  in  another ;  or  to  exchange  the  notes  of  a  suspected  bank  for  the  notes  of  one  of  our 
national  joint-stock  banks,  the  prevailing  confidence  in  our  paper  currency  remaining 
unshaken.  In  this  way  the  disposable  banking  capital  or  resources  remain  in  the  ag- 
gregate unchanged  ;  whereas  with  you  the  run  is  for  gold ;  and  the  coin  thus  with- 
drawn from  one  bank  is  not  re-deposited  in  another,  but  hoarded  till  the  panic  is  over, 
by  which  means  the  entire  banking  resources  of  the  country  are  involved  in  the  conse- 
quences of  the  temporary  disaster ;  and  this,  too,  at  the  very  time  when  these  resources 
are  most  needed." 

IV.  —  Laws  of  the  Currency  in  Scotland. 

In  Scotland  the  lowest  point  of  the  circulation  is  in  March,  and  the 
highest  in  November.  The  advance,  however,  between  these  two  .points 
is  not  uniform,  for  the  highest  of  the  intervening  months  is  May,  after 
which  there  is  a  slight  reaction  ;  but  it  increases  again  until  November, 
and  falls  off  in  December.  The  reason  of  the  great  increase  in  May  and 
November  is,  that  these  are  the  seasons  for  making  payments.  The  in- 
terest due  on  mortgages  is  then  settled,  annuities  are  then  paid,  the  coun- 
try people  usually  take  the  interest  on  their  deposit  receipts,  and  the  ser- 
vants receive  their  wages.  There  are  frequently  large  sums  transferred 
by  way  of  mortgage.  It  is  the  custom  of  Scotland  to  settle  all  transac- 
tions, large  as  well  as  small,  by  bank  notes,  not  by  cheques  on  bankers, 
as  in  London.  It  is  remarkable  that  these  monthly  variations  occur  uni- 
formly every  year,  while  the  amount  of  the  circulation  in  the  correspond- 
ing months  of  different  years  undergoes  comparatively  very  little  change. 

A  TABLE,  showing  the  CIRCULATION  OF  ALL  THE  BANKS  IN  SCOTLAND  on  the  last 
Saturday  in  March,  My,  and  November,  in  the  years  1834, 1835,  1836,  1837,  1838,  and 
1839. 

Number  of  Banks.                    March.  July.                  November. 

£  £                         £ 

1834  21                             2,834,627  3,094,468              3,497,795 

1835  21                             2,822,417  3,097,947              3,457,899 

1836  21                               2,934,292  3,222,142               3,657,431 

1837  22                            2,875,404  2,962,673              3,560,242 

1838  23-24  2,811,377  3,060,199  3,688,410 

1839  24-28  3,041,545  3,120,183  3,559,599 

This  table  shows  us,  first,  that  the  circulation  of  Scotland  is  at  its  lowest 
point  in  the  month  of  March,  is  higher  in  July,  and  reaches  its  highest 
point  in  November.  Secondly,  in  the  corresponding  months  of  different 
years  there  is  but  little  difference  in  the  amount  of  the  circulation.  We 
find  that  during  a  course  of  six  years,  the  difference  between  the  lowest 

327 


A  Treatise  on  Banking. 


and  the  highest  circulation  in  tl»«  corresponding  months  is  vrry  triflinp. 
Thirdly,  the  increase  in  the  numb*  r  of  bunks  docs  nut  produce  a  corn  - 
•ponding  increase  in  the  amount  of  notes  in  circulation.  In  November, 
1834,  the  number  of  banks  of  issue  was  twenty-one;  by  No\.  m'..  r,  1839, 
they  had  increased  to  twenty-  •  :  tin-  circulation  at  tli.-  I'.TIU.T  pe- 

riod was  £  3,497,795,  and  in  the  Int'ter,  ;£  3,559,599.  Fourthly,  these 
facts  prove  that  the  circulation  of  Scotland  does  not  produce  any  (diet  upon 
prices,  nor,  consequently,  upon  the  foreign  exchanges.  It  is  Imnlh 
cetsary  to  adduce  evidence  in  proof  of  the  fuct,  that  the  prices  oi '( ..uiinod- 
ibec  do  not  goon  increasing  from  March  to  November  in  every  \<.n: 
and  if  they  do  not,  they  cannot  be  regulated  by  the  currency.  Fifthly, 
thw  regularity  in  the  circulation  shows  that  it  must  be  governed  by  some 
uniform  laws,  arising  from  the  local  circumstances  or  habits  of  the  coun- 
try ;  and  this  we  think  will  always  be  the  case  where  the  banks  are  p.-.-- 
•ire,  and  permit  themselves  to  be  operated  upon  by  the  wants  of  the  trade 
and  commerce  carried  on  in  their  respective  districts.  (Currency  and 
Banking,  by  J.  W.  Gilbart.) 

That  the  laws  of  the  currency  in  Scotland  are  the  same  since  the  pass- 
ing of  the  Act  of  1845  as  before,  is  evident  from  the  following  Table  :  — 

An  Accorxr  of  At  CIRCULATION  or  THE  BANKS  OF  SCOTLAND  during  the  four 
•Mb  ending  at  the  voder-mentioned  date*,  in  the  year*  1846, 1847,  and  1848,  dutinguith- 
uty  the  note*  of  £  5  and  upward*  from  tJtote  below  that  amount. 


Number 


1846. 


1847. 


1848. 


Much  98 
Aug.  15 
Dec.  5 
March  27 
July  17 
Dec.  4 
March  25 
.July  15 
Dec.  2 


18 


Fixed  toue. 

jt&  and 

Under  £5. 

Toul. 

£3,087,209 

£    828,778 

£2,189,99.) 

£3,018,771 

w 

1,013.539 

2,358,365 

.'I,:}"  1,904 

u 

1,235,072 

2,761.786 

3,996,858 

• 

1,063,384 

2,296,959 

S,3< 

u 

1.121,236 

2,374,682 

3,495,918 

u 

1,143,241 

2,58'J.L'4  1 

:i.::ii',t82 

u 

932,496 

2,019,439 

2,951,935 

u 

MS.MI 

2,123,680 

3,106,643 

u 

1,158,981 

2,411,141 

3,570,122 

The  Act  of  1845  does  not  appear  to  have  much  effect  on  the  amount 
of  notes  in  circulation.  But  it  lias  had  an  effect  in  other  ways.  It  has 
required  the  Scotch  banks  to  keep  a  larger  amount  of  gold  in  their  vaults. 
This  is  evident  from  the  following  Table  :  — 

A  RrrrE»  of  tin  Aggregate  Amount  of  NOTES  IN  CIRCULATION  IN  SCOTLAND,  and 
of  U*  Aggnyau  Amomt  of  GOLD  COIN  AND  BULLION  HELD  BY  BANKS  IN  SCOT- 
LAND, on  Ike  last  day  of  the  ttctxtd  week  of  Ftbruary  and  November,  in  the  yean  1842, 
1843,  1844,  1845,  1846,  and  1847. 


184S 
1843 
1844 
1845 
184« 
IM7 


N  :-, 

£ 
2.710,515 


Coin. 

408,220 

481,102 

422,968 

403,083 

1,116,088 

I..-M: :,•..; 


MUM, 

£ 


.\i.-.  am  i.. 


3,149,554 
3,555,789 
3,784,118 
4.046,526 


Coin. 
£ 

411,070 
Ml^O? 

324,982 
676,674 


It  hn*  also  had  the  eflect  of  inducing  the  banks  to  increase  their  charges* 
and  to  decline  granting  cosh  credits.     The  banks  are  required  to  keep  in 


Currency  in  Scotland. 


their  coffers  a  large  amount  of  gold.  This  increased  amount  yields  no 
interest ;  and  hence  to  that  extent  the  Act  diminishes  their  profits.  To 
make  up  the  same  amount  of  profit  as  heretofore,  the  charges  for  dis- 
counts and  advances  are  increased.  This  illustrates  a  principle  that  we 
think  will  always  be  found  correct,  that  restrictions  upon  banks  are  taxes 
upon  the  public.  This  principle  is  not  sufficiently  obvious  to  statesmen, 
nor  even  to  the  public,  in  England  ;  the  mercantile  classes  have  been 
pleased,  rather  than  otherwise,  when  laws  have  been  passed  injurious  to 
bankers.  In  Scotland  such  matters  are  better  understood.  The  commer- 
cial classes  have  always  rallied  round  the  banks;  they  have  had  the  saga- 
city to  perceive  the  truth  of  the  principle  we  have  advanced  ;  they  know 
that  capital  employed  in  banking  must  be  made  to  produce  an  average 
profit :  and  if  the  Legislature  causes  one  branch  of  business  to  be  less 
productive,  the  bankers  must  make  other  branches  more  productive,  in 
order  to  render  capital  employed  in  banking  as  profitable  as  it  would  be 
if  employed  in  other  occupations.  But  the  Act  of  1845  not  only  in- 
creased the  charge,  it  led  to  a  limitation  of  accommodation.  There  is  no 
one  point  on  which  Scotchmen,  of  all  classes,  are  more  unanimous  in 
opinion,  than  on  the  advantages  that  have  arisen  to  their  country  from  the 
system  of  cash  credits.  This  system  can  exist  only  with  a  note  circula- 
tion. One  of  its  objects  on  the  part  of  the  banker  is  to  increase  his  circu- 
lation. But  he  has  no  profit  by  increasing  his  circulation  of  notes,  if  he 
must  keep  in  his  coffers  an  additional  amount  of  gold  equal  to  that  in- 
crease. But  gold  is  the  idol  of  our  currency  theory.  The  cash  credit 
system,  therefore,  with  all  the  virtues  it  produced,  has  been  offered  up  in 
sacrifice  to  this  "  golden  calf." 

The  following  Table  shows  the  Circulation  of  all  the  banks  in  Scotland 
during  the  year  1848  :  — 

AMOUNT  OF  BANK  NOTES  authorized  by  law  to  be  issued  by  the  several  BANKS  OF  ISSUE 

IN  SCOTLAND  and  the  AVERAGE  AMOUNT  OF  BANK  NOTES  IN  CIRCULATION  and 

qfCoiN  hdd  during  thirteen  periods  of  four  weeks,  from  December  4th,  1847,  to  November 

4th,  1848,  as  published  in  the  Gazette. 

N— of  Bante, 

Bank  of  Scotland         .... 
lloyalBank      .         .        .        .         .' 
British  Linen  Company      ... 
Commercial  Bank  of  Scotland         . 
National  Bank  of  Scotland  ... 
Union  Bank  of  Scotland  .         .        . 
Edinburgh  &  Glasgow  Bank        .        . 
Aberdeen  Banking  Company  .        . 
Aberdeen  Town  &  County  Bank          . 
North  of  Scotland  Banking  Company 
Dundee  Banking  Company  ... 
Eastern  Bank  of  Scotland        .        . 
Western  Bank  of  Scotland  .        .        . 
Clydesdale  Banking  Company .        .' 
City  of  Glasgow  Bank          .        '.        . 
Caledonian  Banking  Company        . 
Perth  Banking  Company     ... 
Central  Bank  of  Scotland        .        . 


Authorized 

Average 

Circulation. 

Circulation. 

Coin. 

£  300,485 

£  326,276 

£  160,042 

183,000 

182,293 

80,866 

.     438,024 

408,300 

142.052 

374,880 

430,415 

146^449 

.     297,024  , 

292,681 

70,415 

327,223 

304,923 

91,163 

.     136,657 

124,048 

36,716 

88,467 

103,776 

33,652 

70,133 

83,767 

18,950 

154,319 

141,919 

18,772 

.       33,451 

27,821 

5,281 

33,636 

31,806 

6,518 

.    337,938 

374,959 

111,694 

104,028 

100,621 

28,001 

.       72.921 

104,366 

52,657 

53,434 

55,296 

15,762 

.       38,656 

43.738 

13,738 

42,933 

43,743 

10,880 

Totals 


BB 


329 


3,087,209       3,180,748          1,043,608 


A  Trealitf  on  Banting. 

The  following  is  the  latest  return,  taken  from  the  Bankers'  Mngnrine 
for  May,  1HI9,  and  shows  the  proportion  between  tin-  n«>i,  -  of  £b  and 
above,  and  those  below  .£5.  One  advantage  arising  from  this  puhl  lent  ion 
ts,  that  we  can  so  readily  refer  to  the  records  of  the  circulation.  Those 
who  have  never  waded  through  Parliamentary  Returns  in  order  to  prepare 
tables  for  the  publir  little  know  tin*  time  and  labor  thus  COUSUUH  •<!.  \\  •• 
now  find  this  done  to  our  hand,  and  laid  before  us1  in  a  must  lucid  manner, 
every  month.  The  future  history  of  banking  and  of  curn-m-y  will  be 
compiled  from  the  facts  recorded  in  the  pages  of  the  Bankers1 


ArtmAOB  CIBCDLATIOX  eutd  Com  Md  by  the  SCOTCH  BANKS  during  the  four  vttkt 
•wfiay  Saturday,  the  24th  day  of  March,  1849. 


Na—  of  Bank* 

Authorized 
Circulation. 

Average  Circulation  during  Four   Auburn  ••( 
weeki  ending  M  above.       Gold  &  Silver 
.  held 
£5  and       Under        T  ..       during  Four 
upward*.       £&                   '     Week*  ending 

M  above. 

£ 

£ 

,  rl 

£ 

£ 

1                       -                    ' 

.    300,485 

-...-.  i  • 

ISO  -•! 

•Vyal  Bank  of  Scotland 

183,000 

•  m 

tujau 

\:  :::•>; 

79,001 

Bnu.h  Unen  Company    . 

.    438,094 

HMBJ 

'.:  '  '.  .'.'.i 

1  i  M 

135,357 

CkMMMlcial  Bank  of  Scotland       . 

.       374,860 

l^i  H| 

m  m 

I  tflft 

i  i  m 

National  Bvk  of  Scotland      . 

.    997,024 

85,453 

\  •;:<-,! 

m  m 

Untan  Bank  of  Scotland       .       . 

.       327,223 

107,477 

1-."  i:: 

m  MM 

UK  M 

Utabayfh  ft  (Baafow  Bank     .       . 

.    136,857 

45,208 

njm 

1  1  •_•  i  >  • 

:;;  ;j; 

Banktnf  Company  in  Aberdeen    . 

88,467 

31,213 

r>  •  -  •*» 

100,070 

40,207 

Aberdeen  Town  ft  County  Bank      . 

.      70,133 

21,834 

•  MB 

74,703 

;•  M 

North  of  Scotland  Banking  Company 

154,319 

•;••  m 

80,512 

127,386 

19.844 

Dvodee  Banking  Company 

.      33,451 

8,208 

18,998 

27,206 

4,698 

Eastern  Bank  of  Scotland      .       . 

33,636 

11,876 

18,228 

30,102 

8,170 

Weelecn  Baa*  of  Scotland       .       . 

.    337,938 

1  •  '  !  '  'i-> 

HVBM 

m  '."' 

-:,  ,;  ;^ 

M  1  i 

>  -.-,-, 

116,909 
31  193 

Oty  of  Otaajow  Dank      . 

.      72,921 

39,572 

i-  •-.-•-.'j 

.V.-M 

Caledonian  Banking  Company     . 

53,434 

13,626 

33,163 

M  m 

16,642 

Penh  Banking  Company  . 

.      38,656 

10,187 

•J.\  "'•! 

34.741 

11,102 

Central  Bank  of  Scotland      .       . 

42,933 

10,603 

26,861 

37,464 

11,242 

Totab 


3,087,209       968,278     1,978,846     2,935,120    1,009,173 


Among  the  theories  on  the  currency  was  a  notion  of  establishing  one 
bank  of  issue  for  the  United  Kingdom.  The  following  evidence  on  this 
subject  was  given  by  Mr.  Kennedy,  the  manager  of  the  Ayrshire  Bank, 
before  the  Committee  on  Banks  of  Issue  in  1841  :  — 

"Do  TOO  think  die  establishment  of  a  (tingle  bank  of  iscuc  for  the  United  Kingdom 
would  be  adraatagcou  or  otherwise  to  Scotland  ?"...."  I  conceive  that  it  must  be 
very  dettrortive  to  Scotland  " 

*•  In  what  way  1"  .  .  .  .  u  It  l»  perfectly  clear  that  it  would  overturn  the  present  sys- 
tsai  of  banking  in  Scotland.  Our  system  of  banking  IK  based  upon  the  power  that  oar 
(.•rnatjf  gives  as  to  allow  a  high  rate  of  deposit  interest ;  if  you  take  from  us  the  profit 
that  o«r  cBireory  yield*,  we  mast  make  our  profit  from  some  other  source  ;  we  mu-t 
incrMkte  the  charges  to  tb«  community,  and  allow  less  interest,  or  probably  no  interest 
at  all,  sad  ov  system  will  be  totally  changed." 

Another  favorite  notion  has  been  the  abolition  of  all  notes  under  £  5. 
A  Committee  of  the  House  of  Lords  and  a  Committee  of  the  House  of 
Commons  made  reports  on  this  subject  in  the  year  1626.  The  evidence 

330 


Currency  in  Scotland. 

produced  by  the  Scotch  banker  was  so  overwhelming,  that  both  the 
committees  recommended  the  postponement  of  the  measure.  Robert 
Paul,  Esq.,  secretary  of  the  Commercial  Bank  of  Scotland,  stated  to  the 
Committee  of  the  House  of  Lords  that  the  following  would  be  the  effects 
of  the  abolition  of  the  small  notes.  (Lords'1  Report,  p.  204.)  :  — 

"  "We  should  diminish  the  number  of  our  branches,  because  we  should  be  involved 
in  an  expense  in  the  transmission  of  gold,  which  the  profits  arising  out  of  our  branches 
could  never  compensate  ;  they  are  not  the  most  profitable  part  of  our  business  ;  they 
are  attended  with  a  great  many  hazards  and  disadvantages. 

''  We  should  withdraw  our  cash  accounts,  because  they  could  no  longer  accomplish 
the  end  for  which  they  were  granted ;  which  was  the  maintaining  our  circulation,  espe- 
cially of  our  small  notes. 

"  We  should  diminish  the  interest  of  our  deposit  accounts,  because  we  should  then  be 
required  to  keep  a  very  large  amount  of  dead  stock  of  gold  in  our  coffers,  to  meet  the 
constant  variations  that  would  arise,  and  to  keep  it  wholly  unproductive.  I  imagine 
that  if  a  gold  currency  were  substituted  for  a  small-note  currency,  there  would  be  a 
much  greater  amount  of  gold  required  than  there  is  at  present  of  notes.  We  have  at 
present,  in  order  to  meet  the  constant  variations,  a  large  amount  of  notes  constantly  on 
hand,  and  in  the  same  way  we  should  require  a  stock  of  gold,  and  that  would  be  pro- 
portionably  larger  as  the  general  circulation  would  be  greater."  (Lords'  Report, 
p.  132.) 

The  following  letter,  written  by  an  agent  at  Inverary,  to  Roger  Aytoun, 
Esq.,  manager  of  the  Renfrewshire  Bank  at  Greenock,  states  the  incon- 
veniences which  the  writer  apprehends  would  result  from  the  introduction 
of  a  metallic  currency  into  that  part  of  Scotland :  — 

"  With  regard  to  the  proposed  measure  of  suppressing  bank  notes  in  Scotland  for 
less  than  £5,  I  think  it  would  be  ruinous  to  this  country ;  for  I  cannot  see  how,  if  it 
takes  place,  the  business  of  the  country  can  be  carried  on.  Confining  myself  to  some 
of  the  most  prominent  instances  in  which  the  Highlands  will  be  affected,  I  shall  state 
the  difficulties  that  occur  to  me.  Our  produce  chiefly  consists  of  cattle  and  sheep, 
grain,  wood,  kelp,  and  the  production  of  the  fisheries.  Cattle  are  brought  to  the  coun- 
try markets  by  the  breeders,  chiefly  small  farmers,  every  man  attending  his  own,  and 
having  generally  from  one  to  three  young  animals  for  sale.  There  they  are  met  by 
the  dealers  and  graziers,  who  purchase  such  of  the  beasts  as  suit  them;  and  it  is  seldom 
that  a  single  animal,  at  the  age  of  one  or  two  years,  being  the  ages  at  which  they  sell 
them  to  the  dealers  and  graziers,  comes  to  the  price  of  £  5 ;  the  price  is  more  frequently 
from  £2  to  £4.  Of  these  a  dealer  often  purchases  two  or  three  hundreds  in  single 
beasts,  so  that  he  has  more  than  £  1  and  less  than  £  5  to  pay  to  each  of  as  many  sellers  ; 
but  he  has  no  notes  under  £,  5,  and  the  sellers  are  not  able  to  return  balance  in  any 
coin.  This  will  occur  to  many  dealers  at  every  market ;  and  how  is  the  difficulty  to 
be  removed  ?  The  dealers  must  all  come  loaded  with  gold  and  silver,  and  this  they 
cannot  carry  to  the  necessary  amount ;  and  besides,  they  will  not  be  supplied  by  bank's 
with  gold  and  silver  for  their  bills  by  which  there  would  be  no  profit.  The  means  of 
paying  being  wanting,  the  seller  will  not  deliver,  and  the  object  of  the  parties  is  frus- 
trated ;  and  thus  a  difficulty  is  cast  in  the  way  of  disposing  of  this  material  article  of 
Highland  produce,  which  must  discourage  the  sales,  and  occasion  a  reduction  of  price, 
and  consequently  of  the  rent  and  value  of  land. 

"It  is  the  same  in  the  case  of  grain,  of  which  bear  or  barley  is  what  is  chiefly  sold 
by  small  farmers  to  the  distilleries.  In  settling  for  some  bolls,  bought  in  small  quan- 
tities of  two  or  three  bolls,  £5  notes  will  be  found  most  inconvenient;  and  the  pur- 
chasers and  manufacturers  of  wood  and  bark,  and  of  seaweed  for  kelp,  who  require 
many  hands,  and  pay  off  their  workers  generally  once  in  a  month,  none  of  whom  will 
draw  so  small  a  sum  as  JEl,  nor  so  large  a  sum  as  £5,  will  experience  the  same 
difficulty. 

"  The  herring  fishery  on  our  coasts  employs  several  thousand  men,  and  is  of  very 
great  importance.  Instances  have  occurred  of  herrings  being  taken  in  Lochfine  alone 
to  the  value  of  £  40,000  in  one  season  ;  and  a  thousand  boats  are  generally  employed 

331 


A  Treatise  on  Banking. 


there  la  the  fishing.    The 


•  fishermen  every  morning  sell  their  fi»h  to  the  curer*  on 
,  and  K-t  out  in  quc.«t  of  more.  The  value  of  each  boat's 
nes  exceed  £ft,  but  generally  is  under  it .  and  tl,.  • 
tab  fiahiag  staBon  alone,  a  thousand  boats  to  U>  paid  . .it  e\  cry  morning,  of  whom  most 
probably  two  thirds  have  10  receive  less  than  JC5  each.  It  will  !*•  impo--iM.  to  provide 
iroU  and  silver  rafldent  for  such  a  purpose  ;  and  in  the  remote  parts  of  the  N,.rth 
Highlands,  what*  the  fishery  is  much  more  extensive,  and  banks  at  a  greater  distance, 
iMcBlty  U  insuperable, 

~  At  prevent  the  bosineas  of  the  Highland*  i*  transacted  by  means  of  tank  notes  of 
XI  and  £  I  Is.  with  some  larger  notes  on  occa-i.ui>.  and  that  with  the  -rcatc-t  facility. 
•  'attle  dealers,  and  all  others,  wiving  to  pay  away  money  to  any  amount  in  small  sums 
*o  a  number  of  people,  as  in  the  iu-t.mcc-  mentioned,  prepare  th< -m-.-U.  -  by  a  \u\\- 
tmre  of  none,  some  Urge  and  some  small,  accompanied  by  a  few  pound-  .•: 
every  thing  goes  on  *  el  I  i  are  preferred  by  the  country  p. -.pi,-  i. 

gold,  both  Mcaase  they  are  unable  to  distinguish  U-twcen  the  genuine  and  base  metal. 
and  becaase  these  coins  are  more  liable  to  be  lost  from  their  pocket-  than  notes ;  and 
they  have  no  reason  to  repent  their  confidence  in  the  stability  of  these  banks,  whose 
notes  they  have  been  accustomed  to  receive  for  so  many  years  in  their  Iran-action-. 
Hut  if  small  notes  are  superseded,  and  gold  Mib-titutcd,  It  is  not  easy  to  see  how  the 
sapplv  of  gold  is  to  be  kept  up  to  curry  on  the  hu-incss  and  transactions  of  this  conn- 
try.  Ahould  a  quantity  of  it  be  received  into  the  circulation,  it  would  not  remain  long, 
bat  lad  its  way  into  the  banks,  who  will  not  again  give  it  out  in  bills  as  they  do  their 
notea,  and  it  will  immediately  become  a  scarce  article  in  the  country.  A  person,  then, 
having  to  pay  in  small  sums,  will  on  every  such  occasion  lie  ob!L<  .1  to  -.  ml  !  •• 
notea  to  the  bank  that  issued  them,  perhaps  a  hundred  miles  oil.  to  receive  gold  and 
silver  in  their  place,  to  answer  his  purpo-e.  The  conveyance  of  it  to  him  i-  next  to 
be  provided  for.  The  weight  may  \>c  too  much  for  the  post.  There  arc  no  mail 
roaches;  and  he  must  cither  employ  a  carrier,  moving  too  slowly  for  his  occasions,  or 
be  at  the  expense  of  sending  a  trusty  person  for  (lie  treasure. 

fcln  transmitting  money  from  one  part  of  the  conntrv  to  another,  the  same  difficulty 
will  often  present  it-elf.  S;ippo«e  a  pervon  in  the  \V.  -tern  I.-les  has  to  pay  £.  19  to 
one  on  the  Continent.  At  present  this  may  !«•  conveniently  done  by  three  notes  of 
£  5  and  four  of  £  I  inclosed  bv  post ;  but  when  thm-  .-hall  [*>  no  £  1  not.  s,  tl.e  odd 
£4  must  be  sent  in  gold  or  silver,  not  conveniently  curried  in  a  j.o-t  letter,  and  re- 
quiring that  a  person  be  employed  for  the  purpo-e,  and  at  some  expense. 

14  Many  other  such  difficulties  and  inconveniences  will  occur.  These  presented 
themselves  to  me,  and  I  stated  them  hastily,  without  regard  to  order.  If  you  Jind 
any  thing  in  them  useful  for  the  purpose  1  shall  be  pleased.  But  it  appears  extremely 
hard  that  the  Scotch  system  should  be  disturbed,  and  that  we  should  be  obliged  to 
adopt  one,  not  only  unsuitable  to  our  purposes,  hut  ruinous  to  the  business  of  our 
coantry." 

V. —  Those  Operations  of  the  Scotch  Banks  that  refer  to  Cash  Credits, 
Deposits,  Remittances  to  India,  and  the  Settlement  of  the  Exchanges. 

I.  Cask  Credits.  —  A  cash  credit  is  an  undertaking  on  the  part  of  the 
bank  to  advance  to  a'n  individual  such  sums  of  money  as  he  may  from 
time  to  time  require,  not  exceeding  in  the  whole  a  certain  definite  amount, 
the  individual  to  whom  the  credit  is  given  entering  into  a  bond  with  secu- 
rities, generally  two  in  number,  for  the  repayment  on  demand  of  the 
gums  actually  advanced,  with  interest  upon  each  issue  from  the  day  upon 
which  it  is  made. 

Cash  credits  are  rarely  given  for  sums  below  £  100 ;  they  generally 
range  from  .£200  to  .£500,  sometimes  reaching  £  1,000,  and  occasional- 
ly a  larger  sum. 

A  cash  credit  is,  in  fact,  the  same  thing  as  an  overdrawn  current  ac- 
count, except  that  in  a  current  account  the  party  overdraws  on  his  own 


Cash  Credit  System. 

individual  security,  and  in  the  cash  credit  he  finds  two  sureties  who  are 
responsible  for  him.  Another  difference  is,  that  a  person  cannot  over- 
draw his  current  account,  without  requesting  permission  each  time  from 
the  bank  ;  whereas  the  overdrawing  of  a  cash  credit  is  a  regular  matter 
of  business,  —  it  is  in  fact  the  very  thing  for  which  the  cash  credit  has 
been  granted.  The  following  advantages  have  been  ascribed  to  the  cash 
credit  system. 

1.  Cash  credits  enable  young  men  of  good  character  to  acquire  wealth 
and  respectability.  (This,  and  the  following  quotations,  are  taken  from 
the  evidence  given  by  the  witnesses  from  Scotland,  before  the  Committees 
of  Lords  and  Commons,  appointed  to  consider  the  expediency  of  abolish- 
ing the  notes  under 


"  I  have  known  many  instances  of  young  men  who  were  starting  in  the  world  from 
low  situations  of  servants,  who  have  conducted  themselves  well  during  the  time  they 
were  apprentices,  or  farm  servants  even,  who  were  able  to  procure  an  account  from  a 
bank  by  means  of  some  friends  or  acquaintances  becoming  their  securities,  that  in  the 
course  of  their  business  have  raised  themselves  to  situations  by  becoming  farmers  of 
considerable  extent,  or  manufacturers  in  a  way  highly  creditable  to  themselves  and 
beneficial  to  the  country. 

"  Without  cash  credits,  sober,  attentive,  and  industrious  people,  would  not  have  the 
means  at  all  of  following  up  what  they  very  deservedly  might  be  encouraged  to  follow 
up  ;  they  begin  the  world,  in  all  probability,  with  a  mere  trifle,  which  trifle  they  have 
been  known  to  make  by  their  own  industry.  Having  made  that,  it  recommends  their 
character  to  persons  of  perhaps  a  little  more  fortune,  who,  to  encourage  them,  become 
sureties  for  their  cash  accounts. 

"  The  classes  of  persons  who  have  cash  credits-  are  very  various  ;  but  they  are  gen- 
erally the  industrious  classes  of  persons,  merchants,  and  traders,  and  farmers. 

"  The  accommodation  is  more  readilv  given  to  a  small  than  to  a  large  amount,  — 
the  bank  preferring  to  grant  ten  credits  for  £  100  than  one  for  £  1.000,  thereby  demon- 
strating that  their  accounts  are  quite  as  much  for  the  asistancc  of  the  poor  as  for  the 
accommodation  of  the  rich." 

2.  Cash  credits  furnish  great  facility  to  tradesmen  and  others  in  carry- 
ing on  their  business,  either  in  the  way  of  raising  money,  in  making  pur- 
chases, or  in  employing  at  particular  seasons  their  surplus  capital. 

"  Is  the  advantage  to  the  party  borrowing  greater  under  the  system  of  cash  credit 
than  under  the  system  of  lending  in  the  ordinary  mode  ?  —  Infinitely. 

"  Why  ?  —  As  to  the  question  of  actual  pounds,  shillings,  or  pence,  paid  in  the  shape 
of  interest,  there  is,  in  the  first  place,  this  difference,  that  when  he  discounts  a  bill  ho 
pays  the  interest  on  the  sum  for  three  months,  if  that  be  the  currency  of  it  ;  should 
any  accidental  mercantile  transactions  throw  into  this  individual's  hands,  on  the  next 
day,  the  same  amount  which  he  had  thus  received  from  the  banker,  he  has  lost  the 
benefit  of  the  transaction,  because  he  must  keep  this  ;  if  he  has  a  deposit  account  with 
the  banker  he  must  keep  it  at  banker's  interest,  while  he  is  anticipated  by  having  paid 
to  the  banker  three  months'  discount  interest  on  his  bill  ;  if  a  trader  were  to  take  bis 
money  systematically  by  discounts  instead  of  by  cash  accounts,  a  disadvantage  to  him 
would  arise.  The  same  principle  applied  to  small  sums  ;  if  half  or  a  quarter,  or  any 
part  of  the  advance  which  he  may  have  received  upon  the  cash  account  comes  in  to  him, 
he  immediately  lessens  the  advance  by  paying  it  into  the  bank,  and  the  interest  being 
calculated  at  the  close  of  the  account,  there  is  a  progressive  account  of  interest  dimin- 
ishing with  the  principal  sum  till  it  is  extinguished.  So  far  as  to  actual  benefit  of 
interest;  but  the  convenience  of  getting  money  when  wanted,  affords  a  very  material 
advantage,  independent  of  the  actual  benefit. 

"  What  are  the  facilities  that  exist  in  obtaining  this  sort  of  advantage,  compared 
with  those  of  obtaining  an  ordinary  loan?  —  When  a  person  applies  for  a  cash  w- 
c-ount,  which  is  not  au  immediate  advance  of  money  on  the  part  of  the  bank,  but  a 

333 


A  Trtatite  on  Banking. 

eosjfcniaf  of  the  power  or  privilege  of  drawing  upon  the  hank  to  the  extent  M,- 
the  person  proposes  two  or  more  personal  sureties :  a  bond  i-  made  out.  nn.l  !„•  draw* 
•  require*,    la  this  way  be  ha*  never  more  from  the  lumk  than  is  absolutely 
for  ate  purposes  of  hi*  business.    The  account  is  never  rivalled,  unless  it 


to  be  beneficial  to  the  bank,  by  having  l»- n  hut  little  operated  upon,  and 
thoB  not  having  promoted  the  circulation 'of  the  bank'.*  notes.  Whenever  it  be. 
•  dead  advance,  the  bank  ralU  it  op.  In  the  case  of  a  person  obtaining  A  loan.  I,.- 
would  probably  in  die  lint  place,  have  to  pay  the  inti -re«t  down  at  once ;  he  would 
bare  to  pav  it  ui««n  the  whole  Mini,  whether  fie  should  reouitv  it  ultimately  or  not, 
and  it  would  be  liable  10  be  recalled  by  the  lender  at  his  pleasure." 

"  The  person  who  procure*  a  each  credit,  docs  no  upon  the  security  of  two  or  three 
MbMamial  individual*.  He  may  be  a  mnn  of  little  property,  l.ut  upon  that  security 
be  gets  a  credit,  perhaps  of  £000  j  hi-  hill  to  any  thing  like  that  amount,  without 
those  securities,  would  not  he  di»count«l. 

•:cr  the  permanent  credit  is  given,  rhe  option  of  using  it  lies  solely  with  the  bor- 

vsjr,  not  with  the  bank,  as  does  also  the  option  of  the  period  of  rv|«a\  mi-nt 

•If  a  »mall  trader  borrow  of  an  individual  (not  a  hanker)  £  UMI,  that  indnidual 
would  not  be  disposed  to  receive  hack  his  money  in  £5,  or  £  10,  or  £  15,  —  he  would 
wait  till  the  term  expired,  when  he  \vould  receive  the  whole.  When  a  credit  is  granted, 
the  individual,  perhaps,  draws  out  £  50  to-day,  and  pays  in  £40  to-morrow,  and  goes 
on  in  that  way,  always  having  credit  with  the  hank  to  the  extent  originally  Mipulati  d. 

M  The  repayment  as  well  as  the  overdraught  is  permitted  l.y  the  hank  to  he  made 
hi  email  sums  piecemeal:  so  that  by  attention  in  his  repayment,  the  borrower  saves 
himself  from  paying  interest  on  more  than  the  precise  advance  for  which  he  has  occa- 
sion at  the  moment,  and  can  constantly  convert  to  a  safe  and  profitable  purpose  the 
money  which  he  may  rvet  i.e  in  the  course  of  his  trade,  however  small  the  amount. 

"  Tnese  advantage*  are  steadily  and  uniformly  afforded  at  all  times  to  the  indiistri- 
i,  or  fanner,  the  merchant,  the  professional  man,  and  the  landlord.'' 


3.  Cash  credits  supply  capital  for  carrying  on  extensive  branches  of 
trade,  employing  the  population,  and  constructing  public  works. 

"  Cash  credits  for  small  sums  enable  the  poor  to  he  as  instrnmcntal,  as  far  as  their 
•Man*  go,  in  increasing  the  capital  of  the  country  as  the  rich  arc.  For  the  produce 
of  that  industry  which  cash  account  credits  enable  to  operate,  and  of  that  capital 
which  they  leave  at  liberty  to  be  employed  in  trade,  goes  to  increase  the  real  wealth 
and  capital  of  the  country ;  and  a  great  proportion  of  the  transactions,  carried  on 
through  the  instrumentality  of  ca»h  accounts,  con-ists  of  those  of  the  poorer  classes. 

"I  apprehend  that  those  cash  credits  have  enabled  a  large  number  of  manufacturers 
to  carry  on  business,  and  to  employ  the  population  of  the  country,  who,  if  they  hod 
not  amen  credits,  could  not  have  carried  on  such  business,  nor  employed  such  popu- 


u  Cash  credits  are  granted  to  almost  all  descriptions  of  persons  throughout  the 
country.  Every  young  man  who  has  a  prospect  of  success  on  entering  lid-.  :. 
for  a  c**h  credit.  A  great  manv  gentlemen  have  cash  credits,  and  a  great  many  farm- 
en.  There  is  hardly  any  public  work  undertaken  in  Scotland  that  the  lir-t  object  is 
not  to  apply  for  a  cash  credit,  to  cam-  it  on  to  advantage.  All  the  roads  in  Scotland 
are  managed  by  Parliamentary  trustees ;  and  I  believe  there  is  hardly  any  one  of 
those  sett  of  trustees  which  have  not  cash  accounts  for  the  purpose  of  carryiiiL'  on 
their  operations.  I  am  sure  many  of  the  most  important  public  works  in  Scotland 
woald  not  have  been  carried  on,  or  certainly  not  with  the  same  advantage,  but  for  the 
credits  they  obtain  from  the  banks." 

4.  Cash  credits  prevent  large  manufacturers  setting  up  as  bankers,  and 
thu»  they  exclude  those  evils  which  in  other  countries  have  resulted  from 
the  failure  of  private  banks. 

"Wfcam jbe_*7"t*ai  *•  applied  to  the  case  of  large  manufacturers,  employing  hnn- 
or  thowanils  of  workmen,  and  possessing  a  cash  credit  to  a  proportional"; 
t,  mpoB  ronVient  security,  one  obvious  effect  is,  that  the  temptation  is  removed 
list  •aaa&etarer,  of  attempting  to  Usne  notes,  and  becoming  himself  a  hanker. 


Cash  Credit  System. 

an  error  or  temptation  which,  if  what  is  said  is  true,  has  been  the  main  cause  of  the 
institution  of  many  insufficient  English  bankers,  whose  partners,  from  being  good 
traders,  became  bad  bankers,  and  brought  upon  their  own  district  the  distress  which 
bad  banking  sooner  or  later  always  produces." 

5.  Cash  credits  have  a  considerable  moral  influence  upon  the  habits 
and  character  of  the  people. 

"  The  security  afforded  to  a  bank  by  its  debtor,  or  rather  its  customer,  on  a  cash  cred- 
it, is  by  bond,  with  two  sureties  at  the  least,  —  occasionally  there  are  not  two  sureties, 
but  frequently  many  more ;  the  practical  effect  of  which  is,  that  the  sureties  do,  in  a 
greater  or  less  degree,  keep  an  attentive  eye  upon  the  future  transactions  and  charac 
ter  of  the  person  for  whom  they  have  thus  pledged  themselves.  And  it  is,  perhaps, 
difficult  for  those  who  are  not  intimately  acquainted  with  it  to  conceive  the  moral 
check  which  is  afforded  upon  the  conduct  of  the  members  of  a  great  trading  com- 
munity, who  are  thus  directly  interested  in  the  integrity,  prudence,  and  success  of 
each  other.  It  rarely,  indeed,  if  ever,  happens  that  banks  suffer  loss  by  small  cash 
credits. 

"  This  system  has  a  great  effect  upon  the  moral  habits  of  the  people,  because  those 
who  are  securities  feel  an  interest  in  watching  over  their  conduct,  and  if  they  find 
they  are  misconducting  themselves,  they  become  apprehensive  of  being  brought  into 
risk  and  loss  from  having  become  their  securities,  and  if  they  find  they  are  so  miscon- 
ducting themselves,  they  withdraw  the  security. 

"  Sometimes  cash  credits  are  recalled  from  the  interference  of  the  securities.  They 
have  the  power  of  knowing  from  the  bank  at  any  time  the  state  of  the  account,  and 
the  operations  upon  it ;  and  if,  from  that,  or  from  other  circumstances,  they  have  been 
led  to  think  less  favorably  of  the  person  for  whom  they  gave  the  security,  they  can 
immediately  cease  to  allow  that  account  to  be  further  operated  upon." 

The  Report  of  the  Committee  of  the  House  of  Lords  contains  the  fol- 
lowing observations  upon  the  effects  of  cash  credits  :  — 

"  There  is  also  one  part  of  their  system  which  is  stated  by  all  the  witnesses,  (and  in 
the  opinion  of  the  committee  very  justly  stated,)  to  have  had  the  best  effects  upon  the 
people  of  Scotland,  and  particularly  upon  the  middling  and  poorer  classes  of  society, 
in  producing  and  encouraging  habits  of  frugality  and  industry.  The  practice  referred 
to  is  that  of  cash  credits.  Any  person  who  applies  to  a  bank  for  a  cash  credit,  is 
called  upon  to  produce  two  or  more  competent  securities,  who  are  jointly  bound ;  and 
after  a  full  inquiry  into  the  character  of  the  applicant,  the  nature  of  his  business,  and 
the  sufficiency  of  his  securities,  he  is  allowed  to  open  a  credit,  and  to  draw  upon  the 
bank  for  the  whole  of  its  amonnt,  or  for  such  part  as  his  daily  transactions  may  re- 
quire. To  the  credit  of  this  account  he  pays  in  such  sums  as  he  may  not  have  ccca- 
sion  to  use,  and  interest  is  charged  or  credited  upon  the  daily  balance,  as  the  case  may 
be,  From  the  facility  which  these  cash  credits  give  to  all  the  small  transactions  of  the 
country,  and  from  the  opportunities  which  they  afford  to  persons  who  begin  business 
with  little  or  no  capital  but  their  character,  to  employ  profitably  the  minuted  products 
of  their  industry,  it  cannot  be  doubted  that  the  most  important  advantages  are  derived 
from  the  whole  community." 

As  by  cash  credits  the  banks  render  themselves  liable  to  be  called  upon 
at  a  moment's  notice  for  the  amount  of  the  credit  granted,  it  is  natural 
to  suppose  that  they  contemplate  some  advantage  in  return.  The  ad- 
vantage contemplated  is  the  circulation  of  their  notes.  It  is  not  intended 
that  the  cash  credit  shall  be  a  dead  loan  of  capital.  It  is  expected  that 
there  shall  be  a  perpetual  paying  in  and  drawing  out  of  money,  and  the 
smaller  the  denomination  of  the  notes  drawn  out,  the  more  advantageous 
is  the  account  to  the  bank.  Manufacturers,  who  pay  away  large  sums 
every  week  in  wages,  linen  buyers  and  cattle  dealers,  millers  and  pro- 
vision merchants,  who  make  their  purchases  in  small  sums,  and  generally 

335 


A  TVeoJwe  on  Banking. 

all  those  who  have  quick  returns  of  money  passing  through  tlirir  hands, 
have  the  means  of  making  a  cash  credit  profitable  to  the  bank.  On  this 
subject,  I  again  quote  the  evidence :  — 

•To  secure  to  the  bank  the  adrantages  of  circulation,  which  is  to  make  it  worth 
while  to  afford  these  facilities  at  so  little  c\pcn>c  to  their  <  u-tomcr-.  he.  on  his  part, 
is  to  lose  no  opportunity  of  brinpnjt  to  the  bank,  and  thus  withdrawing  fiom  lirmla- 
tioa,  the  notes  of  every  rival  bank  which  comes  into  his  hands  in  the  course  of  his 
transaction* ;  or  of  paying  away,  and  thus  introducing  into  circulation.  IH  inan\  of  the 

note*  of  the  bank  as  Kis  transactions  admit  of,  always  £1  notes  if  j dbla.     '1  he  p:.\ 

meats  and  receipts  most  be  frequent,  for  in  this  consists  the  banker's  profit,  n..i'-- 
much  as  the  payments  are  uniformly  mode  t.\  him  in  his  o\\n  notes,  and  the  receipts 
are  generally,  in  a  very  great  degree,  in  the  notes  of  other  hank-  'I  •  iippo-m^  a 
•aopSJSSnor  to  have  a  credit  for  £50  or  £  lOO,  if  his  receipts  and  pnvinent-  a. 
£  5  per  day,  he  may  in  six  months,  or  150  days,  have  placed  750  of  his  banker's  £  I 
note*  in  circulation. 

-  It  is  quite  necessary,  in  order  to  render  a  cash  account  beneficial,   that  there 
••odd  be  repeated  and  continued  operations  upon  it ;  that  the  transactions  should  he 
numerous;  that  there  should  be  a  continual  drawing  out  and  paying  in  of  money; 
and  that,  by  these  means,  a  circulation  of  the  hank-notes  may  be  promoted  ;  <n\,< 

the  account  is  withdrawn,  and  the  pi-cat  reason  of  this  is,  that  these  account*  are.  not 
intended  to  form  dead  loans,  but  to  be  productive  of  circulation  to  the  hank. 

*  The  explanation  of  the  cash  credit  system  is  this:  —  The  hank  who  :ir-t  opened  a 


credit,  opened  it  with  an  individual  shopkeeper,     lie  received  |..  _-.  :>n  i.t  of  his 
s  in  the  currency  of  the  country.    Previous  to  that  system,  lie  M 


_ 

goods  in  the  currency  of  the  country.    Previous  to  that  system,  lie  MM  to  put  his  .  m- 
reocy  into  his  drawer,  £B  or  £  10,  or  whatever  it  was.    If  people  l.iou-ln  him  : 
money  to  pay  for  his  goods,  he  returned  tho>e  people  change  ;  or  if  he  did  not.  he  kept 
it  until  he  w'anted  to  purchase  for  himself.     But,  after  the  hanker  ha<l  explained  to 
him  what  be  wished  him  to  do,  when  the  shopkeeper  received  the  .  .f  the 

country,  instead  of  putting  it  into  his  till,  lie  looked  to  the  hanker'-,  shop  a>  his  till, 
and  ha'ndcd  it  over  to  the  hanker,  and  left  his  own  till  with  only  the  change  which  he 
could  not  do  without.  Then,  when  he  required  sums  to  pay  away,  instead  of  taking 
them  from  his  till,  he  sent  to  the  bank,  and  took  from  it  what  he  required,  the  hanker 
pirinR  him  his  own  notes.  So  much  of  the  previous  current  y  was  t!.  i.  and 

the  banker's  notes  taken  in  its  place.  That  was  the  effect  of  the  first  operation,  v\h<  n 
the  thinj;  was  only  in  so  simple  a  state  that  there  was  only  the  notes  of  one  hank  and 
a  metallic  circulation.  If  you  apply  the  same  principle  where  there  are  thirty  hanks, 
the  result  would  be  the  same.  The  amount  of  the  circulation  of  the  country  continues 
the  same,  but  the  proportion  between  its  parts  vary." 

II.  DEPOSITS. 

A  sum  of  money  deposited  or  placed  in  a  bank  is  called  a  deposit. 
Some  banks  grant  interest  on  these  deposits  ;  others  do  not.  The  Lon- 
don bankers  allow  no  interest  on  deposits,  but  the  English  country  bank- 
ers usually  do.  The  Scotch  banks  have  carru-d  this  practice  to  the  great- 
est extent  ;  and  the  deposit  system  forms  a  very  important  branch  of  the 
bonking  system  in  Scotland. 

Those  regulations  which  the  banks  have  established  as  the  rule  of  tin  h 
transactions  between  themselves  and  the  depositors  are  the  following  :  — 

The  depositor  may  place  in  the  bonk  any  amount  of  money  he  pleases 
above  £  10. 

The  whole  or  any  part  of  the  deposit  may  be  withdrawn  at  the  plea- 
sure of  the  depositor  without  previous  notice. 

Interest  is  allowed  on  the  deposit  from  the  day  it  is  lcxl«r<  d  in  the  bonk 
until  the  day  it  is  drawn  out 


Scotch  Deposit  System. 

The  balance  of  a  current  account  is  allowed  interest  at  the  same  rate 
as  though  it  were  a  permanent  deposit. 

The  following  are  the  advantages  ascribed  to  the  deposit  system  :  — 
1.  The  system  of  deposits  is  advantageous  to  the  lower  classes,  in  pro- 
viding a  place  of  safety  for  their  deposits,  in  granting  them  interest  on 
their  savings,  in  encouraging  habits  of  frugality,  and  thus  often  enabling 
them  to  advance  in  society. 

"  The  deposit  branch  divides  itself  into  two  parts :  —  There  is,  first,  what  is  called  a 
running  account,  where  the  party  pays  in  from  day  to  day  the  whole  surplus  funds  in 
his  hands,  and  on  which  he  receives  interest.  These  depositors  are,  in  general,  shop- 
keepers, and  merchants,  and  traders,  more  particularly  in  large  towns ;  and  in  these 
deposit  accounts  there  is  found  at  their  credit  at  the  close  of  every  day,  the  whole 
amount  of  the  money  for  which  they  have  not  immediate  employment  in  their  trade. 
The  second  branch  of  deposits  consists  of  small  sums  placed  in  the  hands  of  the  bank 
at  interest,  which  have  been  in  general  the  savings  of  their  industry,  and  which  are  put 
into  the  hands  of  the  bank  to  accumulate,  and  on  which  they  may  operate  not  in  the 
way  of  a  running  account.  They  may  receive  a  partial  payment  whenever  they 
please ;  and  in  general  these  deposits  are  very  seldom  removed,  excepting  when  an  in- 
dividual has  occasion  to  build  a  house  or  begin  business.  This  class  of  deposits  is  dis- 
tinguished from  running  accounts  by  the  name  of  deposit  receipts."  (Lards'  Report, 
p.  80.) 

"  What  class  of  the  community  is  it  that  makes  the  smaller  deposits  ?  —  They  are 
generally  the  laboring  classes  in  towns  like  Glasgow.  In  country  places,  like  Perth 
and  Aberdeen,  it  is  from  servants  and  fishermen,  and  just  that  class  of  the  community 
who  save  from  their  earnings  in  mere  trifles  and  small  sums  till  they  come  to  be  a  bank 
deposit.  There  is  now  a  facility  for  their  placing  money  in  the  provident  banks,  who  re- 
ceive money  till  the  deposit  amounts  to  £  10.  When  it  amounts  to  £  10,  it  is  equal  to 
the  minimum  of  a  bank  deposit.  The  system  of  banking  in  Scotland  is  just  an  ex- 
tension of  the  provident  bank  system.  Half-yearly  or  yearly  these  depositors  come  to 
the  bank,  and  add  the  savings  of  their  labor,  with  the  interest  that  has  accrued  from 
ths  previous  half-year  or  year,  to  the  principal.  And  in  this  way  it  goes  on,  without 
being  at  all  reduced,  accumulating,  till  the  depositor  is  able  either  to  buy  or  build  a 
house,  when  it  comes  to  be  one,  two,  or  three  hundred  pounds,  or  till  he  is  able  to  com- 
mence business  as  a  master  in  the  line  in  which  he  has  hitherto  been  a  servant.  A 
great  part  of  the  depositors  of  the  bank  are  of  that  description ;  and  a  great  part  of 
ic  most  thriving  of  our  farmers  and  manufacturers  have  risen  from  such  beginnings. 
And  in  regard  to  the  deposit  receipts,  I  may  iust  mention  what  is  generally  the  way  in 
which  they  are  granted.  To-day  a  person  from  the  country  appears  at  the  bank,  it 
may  be  with  £  20  or  £  30  or  £  50.  We  probably  never  see  him  again  till  that  day 
twelvemonths,  but  we  are  sure  of  seeing  him  about  that  very  day.  If  he  has  £  20  in 
the  bank,  he  may  come  and  say,  '  There  are  four  guineas ;  you  will  give  a  receipt  for 
£25.'  He  knows  well  that  the  £20  has  earned  16s.  interest;  and  I  do  consider  that 
the  four  guineas  are  just  the  savings  of  the  year.  He  goes  away  with  his  new  receipt, 
and  returns  on  that  day  twelvemonths ;  then  again  it  is  added  to,  and  thus  accumulated, 

—  and  so  on  in  many  instances  throughout  the  country."     (Commons'  Report,  p.  159.) 

2.  The  system  of  deposits  is  advantageous  to  capitalists  in  furnishing 
them  with  a  secure  mode  of  employment  of  capital,  either  for  a  longer  or 
a  shorter  period,  at  their  pleasure. 

"  What  class  of  persons  form  the  large  and  steady  depositors  in  the  Scotch  banks  1 

—  The  middling  and  the  lower  order  of  society,  industrious  poor  people,  who  are  sav- 
ing their  money,  and  small  capitalists  who  have  raised  a  moderate  sum  of  money, 
upon  the  interest  of  which  they  live. 

"Do  many  persons  live  upon  the  interest  of  their  deposits,  as  far  as  you  know?  — 
Yes,  a  great  many.  (Lords'  Repori ,  p.  165.) 

"Do  you  know  whether  it  is  tha  practice  of  persons  who  have  small  capitals  in 
Scotland,  to  inveat  them  in  the  public  securities  in  London,  or  to  deposit  them  with  the 
cc  337 


A  Trtatite  on  Banking. 

baaks  la  Edinburgh  ?  —  I  believe,  almost  universally,  to  deposit  them  with  a  Scotch 
bank. 

"  And  they  li»p  upon  the  interest  of  what  they  to  deposit,  in  the  manner  a»  j" 
here  lire  ujx-n  tin  ir  interest  on  Mock  *  —  Yes ;  they  often  look  to  the  |>cnutimcnt  ••api- 
ml  with  •  view  of  leaving  it  at  their  death,  taking  the  interest  during  their  i. 
(Omill   '//ryarf,  p    i 

14  The  deposit  accounts  are  of  two  kind*,  — one  kind  from  the  rommcreial  people 
who  have  large  »um»  tii.it  tin  \  « i«h  to  keep  in  a  disposable  form,  waiting  an  o|.|.onu- 
nity  of  any  investment  which'may  occur.  Of  the  operating  deposit*,  there  an  . 
who  keep  "the  money  until  a  favorable  turn  in  the  St..<-k  I-:\<  lum.-.-  enables  them  to  in- 
Test  it  there.  And  there  are  others,  respectable  householders,  who  keep  it  for  the  pnr- 
poaoa  of  their  family  expenditure.  I  reckon  that  these  and  the  sums  due  upon  them 
average  one  half  of  the  aggregate  amount  of  a  bank's  deposits."  (Lordt'  A'r/x/rt, 

I-   II 

•  H.ue  you  formed  any  estimate  of  the  amount  of  deposits  in  all  the  banks  in  Scot- 
land?—Tcertain  I  y  have  boon  at  very  great  pnins  to  gel  information  UJKHI  the  Millet: 
and  I  am  satisfied  that  the  amount  is  considerably  al>ovc  twenty  millions,  —  I  should 
•ay,  twenty-fire  millions. 

••  From  what  clans  of  persons  are  those  deposits  chiefly  f  —  Generally  from  indus- 
trious tradesmen,  small  shopkeepers,  varying  from  £10  to  £  500.  The  greatest  num- 
ber of  deposit*,  and  the  greatest  in  their  aggregate  amount,  ore  in  small  sums. 

-  Are  there  not,  however,  deposits  from  richer  classes,  and  each  of  them  to  a  much 
tarter  amount  t — Certainly,  there   are  deposits   from   £  1,000   to   £  20,000   and 
4:30.000.     (Ibid.  p.  231.) 

"  In  the  spring  of  1 824,  the  hanks  in  Scotland  began,  in  some  instances,  to  decline  ac- 
cepting deposits  at  all.  —  In  the  autumn  of  1824,  the  gr»at  banks  made  an  express  rule 
that  they  would  not  accept  more  than  £5,000  from  any  one  depositor.  They  allowed 
24  per  cent,  on  the  first  £  3,000,  and  2  per  cent.  uj>on  the  remainder  of  the  £  5,000, 
and  above  that  they  would  not  allow  any  interest.  That  was  the  general  rule  with  the 
great  banks  at  that  period.  There  were  many  people  who  preferred  leaving  their 
money,  though  they  received  little  or  no  interest,  to  taking  it  away.  That  commenced 
in  1825."  (Ibid.  p.  158.) 

3.  The  system  of  deposits  is  advantageous  to  the  country,  by  augment- 
ing the  amount  of  national  capital,  by  increasing  the  demand  for  labor,  by 
granting  facilities  to  trade  and  commerce,  and  by  removing  the  tempta- 
tions to  engage  in  hazardous  speculations  and  foreign  investments. 

"  Thi«  system  was  adopted  before  the  middle  of  the  last  century.  The  rate  of  inter- 
est allowed  since  then  has  been  regulated  by  the  value  of  money,  and  has,  of  course 
fluctuated  considerably ;  bat  it  has  ever  been  such  as  to  afford  as  high  a  return  to  the 
depositor  as  has  been  consistent  with  the  reasonable  profit,  and  of  course  the  security 
of  the  bank.  The  effect  of  this  system  has  l-ecn  to  encourage  and  to  afford  the 
means  of  the  accumulation  of  capital  among  the  lower,  as  well  as  the  higher,  orders, 
by  placing  within  the  reach  of  all,  a  convenient,  safe,  and  moderately  profitable  invc-t- 
mrnt  of  money,  and  to  offer  an  inducement  to  capitalists  to  retain  their  accumulations 
to  Scotland,  notwithstanding  the  opportunities  or  temptations  which  foreign  invest- 
ment* might  hold  oat"  (Lord*1  Report,  p.  175.) 

"The  system  of  deposit  accounts.  I  think,  is  a  very  great  stimulus  to  the  habits  oi 
tadastry.  and  economy,  and  frugality,  in  Scotland.  The  whole  surplus  capital  of  the 
individual  i»  thus  rendered  productive. 

"Under  the  system  on  which  you  conduct  your  business,  is  not  the  money  arising 
from  those  deposits  {anted  oat,  to  encourage  the  further  consumption  of  labor  in  the 
country  ?  ^  Tea. 

"  It  would  be  a  low,  then,  to  the  country,  if  it  was  to  be  removed  from  the  channel 
in  which  it  i*  now  placed,  into  this  country,  on  government  debentures  ?  —  It  certainly 
would. 

"  Under  this  system,  does  not  the  poor  workman  pain  immediate  interest  for  his  sav- 
ing, whilst  the  saving  is  immediately  employed,  through  the  bank,  in  putting  a  further 
MxtMM  of  labor  into  motion  1  —  Precise! v  so.  It  is  in  this  way  that  the  wealth  of 

to 


Scotch  Deposit  System. 

those  individuals  is  concentrated,  and,  through  the  agency  of  the  bank,  is  brought  to 
bear  in  carrying  on  the  business  of  the  country."  (Ibid.  p.  283.) 

"  Is  there  not  an  advantage  to  the  public  from  the  gathering  of  those  small  capitals 
together,  forming  part  of  the  deposits  of  the  bank,  and  so  being  sent  out  again  in  large 
sums,  like  other  capitals,  for  the  purpose  of  being  applied  to  increase  the  powers  of 
productive  industry?  —  The  Scotch  banks  form  a  sort  of  reservoir  for  receiving  the 
small  sums  of  capital  scattered  throughout  the  community,  and  then  sending  them  forth 
into  channels  of  trade,  so  as  to  promote  the  commerce,  manufactures,  and  agriculture 
of  the  country.  (Commons'  Report,  p.  203.) 

"  Are  you  of  opinion  that  if  the  deposits  with  the  banks  of  Scotland  were  considerably 
lessened,  the  banks  could  afford  the  same  accommodation  by  discounts  which  they  do 
at  present  ?  —  I  should  think  that  is  impossible,  because  it  forms  part  of  their  capital. 
It  would  diminish  the  capital  which  is  at  present  employed  in  that  business,  of  which 
discounting  forms  a  great  part. 

"  Would  not  any  such  diminution  of  discount  operate  injuriously  to  the  general 
trade  of  the  country  ?  —  The  want  of  those  discounts  must  diminish  the  trade  of  the 
country,  inasmuch  as  the  manufacturer  and  merchant  receives  his  money  at  least  three 
months  sooner  by  discounting  their  bills,  than  he  could  possibly  get  payment  of  his 
account."  (Lords1  Report,  p.  266.) 

"  The  system  of  deposits  forms  a  great  part  of  the  funds  arising  from  our  banking 
system.  It  is  a  great  deposit  of  money,  which  is  given  out  to  the  trade  of  the  coun- 
try, for  the  profit  of  one  per  cent.,  for  which  the  bank  runs  the  risk  of  its  business.  If 
that  great  deposit  were  withdrawn,  and  could  not  be  issued  with  the  same  degree  of 
safety,  I  conceive  the  consequences  would  be  a  total  derangement  of  the  whole  system, 
and  ruin  of  our  country."  (Lords'  Report,  p.  235  ) 

"  If  the  banks  are  under  the  necessity  of  reducing  the  interest  on  deposit  accounts, 
the  depositors  must  look  about  them  and  find  out  on  what  security  they  can  lend  their 
money  so  as  to  obtain  a  higher  rate  of  interest.  It  would  certainly  diminish  the  capi- 
tal of  the  trading  part  of  Scotland,  inasmuch  as  the  banks  would  not  have  it  in  their 
power  to  assist  them,  in  trading  by  discounting,  but  it  might  be  lent  on  Government 
securities  or  landed  property,  and  the  temptation  of  a  higher  interest  from  individuals 
would,  undoubtedly,  be  a  temptation  to  many,  and  a  temptation  that  could  scarcely  be 
resisted  by  those  whose  income  depends  entirely  upon  the  interest  of  that  lent  money, 
to  lend  it  on  personal  and  doubtful  security. 

'•  When  the  banks  reduced  their  interest  some  time  ago,  a  great  part  of  the  deposits 
was  drawn  out,  to  be  invested  in  various  different  ways.  And,  as  the  depositors  did 
not  get  from  the  banks  the  interest  on  which  they  were  depending,  and  did  not  choose 
to  make  a  less  interest,  many  of  them  went  into  schemes,  which  have  turned  out  very 
ruinous  to  them.  It  has  been  one  great  cause  of  over-speculation,  that  the  people  did 
not  get  the  interest  they  had  been  accustomed  to  from  the  banks.  They,  therefore, 
drew  it  out  to  invest  it  in  joint-stock  companies,  lent  it  to  builders,  or  other  inferior  se- 
curities, or  became  builders  themselves."  (Ibid.  p.  250.) 

4.  The  system  of  deposits  is  advantageous  to  the  banks,  by  inducing 
every  person  to  deposit  his  money  in  a  bank,  by  furnishing  the  banks 
with  capital  to  carry  on  their  business,  and  by  putting  in  circulation  a 
large  amount  of  their  notes. 

"  The  universal  practice  at  Glasgow  is  to  pay  into  the  bank  with  which  the  individ- 
ual transacts  his  business,  the  whole  of  the  notes  he  has  in  his  possession,  or  nearly  the 
whole,  every  day."  (Commons'  Report,  p.  50.) 

"  Unquestionably,  the  giving  of  interest  upon  deposits  is  an  inducement  to  every 
person  that  has  any  surplus  money  in  his  hands,  to  place  it  in  the  hands  of  his  banker. 
And  in  the  same  way  in  the  case  of  cash  accounts,  every  payment  by  the  holder  of  a 
cash  account  into  the  bank,  either  diminishes  the  interest  he  has  to  pay  to  the  bank,  or 
if  the  account  should  turn  in  his  favor,  enables  him  to  get  interest  from  the  bank,  and 
that  is  a  great  inducement  for  every  person  to  pay  in  daily  into  his  banker's  hands  all 
the  money  which  he  does  not  require  for  the  purposes  of  his  business."  ( Commons' 
Report,  p.  201.) 

"  The  means  of  a  bank  I  conceive  to  consist  of  three  things  :  first,  capital  paid  in 

339 


A  TrttUite  on  Banking. 

its  own  stock;  secondly,  the  aotta  which  th*  bank  i«  able  to  keep  afloat  in  the  circle ; 
thirdly,  th*  amount  of  to  d«podun  (LonU  /  |  195.) 

"And  if  the  amount  of  «|I-|H.MW  were  Iwjwne.l.  in  that  ut-c  tlicir  moan*  of  issuing 
money  upon  discount  would  be  proportionately  lessened  I  —  Yet.  (Common*'  L 

*  Every  bank  constituted  a*  the  banks  of  Scotland  arc,  mnkc  advances  in  two  wavs, 
—  they  make  tin  m  II|MUI  cash  credit*,  and  they  nmkc  them  upon  ihe  disi-onnt  i.f  l.iils. 
They  also  borrow  in  two  way*, —  thev  borrow  upon  dcpo-it  receipts  ami  they  lx>m>w 
alto  upon  account*  current  That  is,  if  a  pentleman  opens  an  account.  Ami  j  u- 
£100  to  bU  credit,  ami  operates  upon  it,  drawing  out  n  part  of  it,  leiivin:;  a  Ulan.c 
in  tbe  band*  of  the  bank,  tin  n  t>  there  n  lx>rn»winn  to  the  extent  of  the  hulanee  ili.n 
b  M  left  TboM  accounts  we  <!<>  n»t  allow  to  be  overdrawn,  so  that  the  advance  i-  in 
two  wan,  and  the  borrowing  in  two  ways,  that  is,  in  two  dillcivnt  forms."  (Ibid 
p.lv 

"  In  the  ca«c  of  small  depositors,  a  considerable  pan  of  the  profit  arising  from  the 
deposit  of  that  money  if  the  eireulation  of  the  notes.  \\\\<\\  :i  ile|K>sitor  withdraws 
hit  money  from  tbe  bank,  he  r. . .  i\.>s  it  in  the  notes  of  the  bank,  and,  of  course,  they 
go  into  circulation.  As  long  as  they  remain  out  they  are  a  source  of  profit."  (Com 
mo**  Rfpori,  p.  45.) 

;  •   .  r  notes  two  ways,  —  they  auto aiWHMM  "!'""  c:1^'  ;!••' "iint-. 

and  they  make  advance*  upon  discounts.  They  also  issue  tlnir  notes  in  i.Mvment« 
upon  accounts  current,  and  also  in  the  re-payment  of  deposit  receipts."  (LurM  lie- 
port,  p.  836  ) 

u  The  deposit  and  cash  accounts  are  the  instruments  for  supporting  our  circulation. 
and  without  the  continued  operations  upon  the  deposits  and  cash  account*  our  circu- 
lation cannot  be  maintained."  (Hid.  p.  135.) 

III.  REMITTANCES  TO  INDIA. 

Although  this  branch  of  banking  business  is  not  peculiar  to  Scotland 
yet  I  believe  the  banks  of  Glasgow  have  carried  it  on  to  a  greater  extent 
than  any  other  banks.  This  has  arisen  partly  from  the  more  intimate 
connection  that  exists  between  Glasgow  and  India,  and  partly  from  tin- 
character  of  Scotch  banking.  We  refer  to  the  practice  of  granting  bills 
of  exchange  to  be  sent  out  to  India,  accompanied  by  an  undertaking  to 
accept  them  when  presented. 

To  enable  our  readers  to  understand  distinctly  this  branch  of  business, 
t*B  must  give  a  short  description  of  the  banking  and  commercial  opera- 
lions  of  India.  The  business  transacted  at  each  of  the  Presidencies  con 
•Mte  of  importing  British  manufactured  goods,  and  exporting  the  produce 
of  the  country,  such  as  cotton,  indigo,  &c.  Some  of  the  merchants  who 
are  engaged  in  these  operations  act  also  as  bankers.  They  receive  de- 
posits, and  allow  interest  on  them,  receive  dividends  on  India  stock,  and 
make  remittances  to  England.  Their  business  in  this  way  was  formerly 
YCTV  extensive,  but  has  recently  been  much  reduced  by  the  establishment 
of  banks  all  over  the  country.  One  part  of  the  business  of  these  mercan 
tile  bankers  is  to  advance  money  on  shipments  of  goods  either  to  England 
or  to  China,  taking  as  security  the  bill  of  lading  and  the  policy  of  insur- 
ance. Here  they  often  find  a  powerful  competitor  in  the  East  India 
Company ;  and  the  mercantile  interests,  in  both  India  and  Glasgow,  arc 
desirous  of  excluding  the  Company  from  this  kind  of  business.  (Sec  tin; 
Evidence  taken  before  the  Committee  of  the  House  of  Commons  on 
Commercial  Distress,  1848.) 

I  cannot  better  describe  the  kind  of  business  carried  on  in  India,  than 

MO 


Remittances  to  India. 

by  the  following  extract  of  a  letter  I  received  about  two  years  ago,  in  re- 
ply to  some  inquiries  I  made  on  the  subject :  — 

"  One  part  of  business  which  the  houses  used  to  do  largely  was  advancing  on  ship- 
ment of  goods  to  England  and  China,  and  it  is  still  done  by  Messrs. 

and .  The  system  is :  —  A.  ships  £  10,000  worth  of  goods  for  Eng- 
land, and  takes  the  bills  of  lading  and  policies  of  insurance  to  B.,  who  agrees  to  ad- 
vance three  fourths  of  the  value ;  the  shipping  documents  are  indorsed  by  A.  to  B., 
and  A-  draws  bills  on  the  consignee  of  the  goods  in  London  for  the  value,  in  favor  of 
B.,  payable  at  six  months'  sight,  and  directs  him  to  accept  the  bills  when  presented  by 
B_?s  London  correspondent.  As  the  goods  will  most  probably  arrive  in  London  be- 
fore the  bills  fall  due,  the  consignee  will  take  then!  up  before  the  due  date,  and  witli 
the  bills  receive  the  shipping  documents  from  B.'s  correspondent.  Sometimes,  how- 
ever, it  may  be  that  A.  has  no  agent  in  London,  and  the  goods  are  therefore  consigned 
to  B.'s  correspondent,  who  is  instructed  to  sell  and  remit  the  proceeds  by  bills,  or  with 
the  purchase  money  of  the  Indian  goods  to  buy  British  manufactured  goods,  and  ship 
them  consigned  to  B.  You  will  easily  perceive  what  large  profits  could  be  realized  in 
this  way,  as  commission  is  charged  on  the  sale  of  the  Indian  goods,  and  purchase  of 
British,  and  a  high  rate  of  interest  on  the  advance  until  it  is  paid  off. 

"  The  East  India  Company  usually  get  a  portion  of  the  money  required  for  the 
home  expenditure,  from  India,  in  this  manner.  Last  month,  the  government  here 
gave  notice,  that,  in  pursuance  of  instructions  from  the  Court  of  Directors,  it  was  pro- 
posed to  provide  a  sum  of  J£  800,000  in  India  during  the  remainder  of  the  official 
year  1846  -47,  for  the  service  of  the  East  India  Company  in  London,  by  the  purchase 
of  bills  of  exchange  to  be  secured  by  the  hypothecation  of  goods.  Advances  in  cash 
are  accordingly  made  for  the  purpose  by  the  governments  of  Bengal,  Madras,  and  Born- 
bay,  at  the  rate  of  exchange  of  2s.  per  company's  rupee ;  the  operation  is  exactly  the 
same  as  I  have  stated  in  the  former  case.  A.  ships  goods,  and,  on  the  security  of  the 
bills  of  lading,  policies  of  insurance,  and  his  bills  on  consignees  in  London,  at  six 
months'  sight,  receives  from  the  government  an  advance  equal  to  three  fourths  of  the 
value  of  the  goods ;  the  bills,  with  the  shipping  documents  attached,  are  sent  to  the 
India  House ;  and  in  due  course  accepted  by  the  drawee  ;  on  the  arrival  of  the  goods 
the  bills  are  paid,  and  the  goods  given  up.  In  the  event  of  the  ship  arriving,  and  the 
bills  not  being  taken  up,  the  goods  are  then  lodged  in  one  of  the  Dock  Company's 
bonded  warehouses.  If  the  bills  are  dishonored  at  the  due  date,  the  goods  are  sold 
to  reimburse  the  East  India  Company  for  the  advance;  this,  however,  is  an  extreme 
case,  and  could  only  occur  in  the  event  of  the  bankruptcy  of  the  acceptor. 

"  With  reference  to  the  bills  drawn  from  India,  with  an  engagement  on  the  part  of 
the  drawee  to  accept,  in  the  margin,  these  bills  are  obtained  from  a  respectable  Lon- 
don house,  and  sent  out  to  this  country  for  negotiation;  but  I  must  have  recourse 
again  to  my  favorite  plan  of  illustrating  by  an  exainple.  A.  having  credit  with  a 
London  house,  or,  if  not,  lodges  security,  and  obtains  bills,  with  an  engagement  in  the 
margin  to  accept,  and  remits  them  to  A,  his  correspondent,  in  India,  for  the  purchase 
of  produce;  the  drawee  being  well  known,  the  bills  obtain  a  favorable  rate  in  the  mar- 
ket, and  B.  is  enabled  to  purchase  produce,  which  he  ships,  consigned  to  A.  in  London, 
who,  before  the  bills  fall  due,  pays  them  ;  on  paying  the  London  house  commission  on 
the  amount,  the  transaction  is  concluded. 

"  There  is  another  system,  and  you  very  probably  may  have  seen  some  of  the  bills  rn 
the  London  market.  A ,  a  merchant  in  New  York,  proposes  to  send  a  ship  to  China  for 
goods,  but  unwilling  to  have  his  money  locked  up  on  board  ship  for  so  many  months, 
with  the  additional  risk  of  loss,  he  obtains,  either  on  personal  or  other  security,  from 

say  Messrs. 's  agent  in  New  York,  a  letter  of  credit  on  the  house  in 

London,  to  honor  the  bills  of  the  captain  or  supercargo  of  the  ship.     On  the  arrival 
of  the  ship  in  China,  the  cargo  is  purchased  and  paid  for  hy  the  bills  on  Messrs. 

,  London:  the  bills  are  negotiated  in  China,  with  the  indorsement 

of  _  's  agent  there,  and  as  soon  as  A.,  in  New  York,  receives  advice  of 

the  same,  he  remits  the  amount  to  London,  to  meet  the  bills  when  they  fall  due.    I 
inclose  you  a  form  of  one  of  these  American  bills.    Sometimes  money  is  sent  to  India 

by  means  of  London  bankers'  bills,  and  I  have  seen  Messrs. 's  hills 

offered  for  sale,  but  being  drawn  at  short  dates,  do  not  obtain  such  good  rates  of  ex- 
change  as  mi"ht  be  expected;  they  are  seldom  used  for  commercial  purposes,  but  are 
CC*  341 


A  Trcalue  on  Banking. 


adcn  by  officers  of  the  civil  and  military  norvtce*,  iruhinR  to  make  remittance*  to 
their  fiuiiUM  M  home.    I  understand  that  the  Western  Bank  of  Scotland  issue*  dill* 

..••...•  •       .        ;  • 

••  Thi*  operation,  M  far  as  an  exchange  operation,  i>f  tlu<  Lanks  i--u;n.-  tlu>  )>i!l-, 
woald  Mramlbe  a  profit  raficieBt  to  cover  ihc  n-k.    >u|.|...-.-  the  I.<>n<!»i>  .,n.i  \ 
minster  Bank  tent  out  to  an  agent  here  iu  bilU  at  M  -hi.  for  X-U.IMMI  an. I 

(hat  the  hilU  are  told  at  to.  per  rupee ;  the  aecnt  mi, 

»hich  he  hat  received,  and  even  ttlmittiii);  that  be  <  .. ,.„!,. .m i.ui  lulls 

at  2  percent,  under  that  rate,  it  would  scarcely  pay  his  commission  on  the  tr.i; 

•         !.     ' 

iv  in  which  merchants  M-ttlo  their  rxchonpe  operations  in  Huinhny, 
i  the  tame  all  over  the  !  • 

•  clruw  for  on   Iji^liinil ;  .-1.  fr  Co.  arc  calU d 
•  .  r. mil  Jt.'i'  .1  lf»l  Imyrrs,  ami  citli  r  for  lliat 

LJ).  bil  :  £  .">  I'lin  more,  KII  that 

tioo  k  completed  ;  ami  unic-s  a  l>:ink  i  |  r. -pared  to  buy  up  ull  ilic 
lie,  at  the  suine,  or  a  more  favoralile  mte  than  a  merchant  can  oiler, 
I  iu  c\  •rations  prolitahly.  the  merchants  lniyin^  and  ^ellin^ 

•,  aave  all  the  bankers'  i-i.m-i-N.     'J'his,  I  imagine,  has  l.< m  the  case 
in  all  coontriet  bewre  the  tyitcm  of  imnki!i|.'o]>(>rat!.  .n-ly  understood  ;  and  1 

have  no  doubt,  but  that  in  a  short  time  we  shall  see  all  exchange  business  done  by  the 


: 

. 
*JW    1 

•mount  o 
the  whole 

.-     :',n 
it 


POBMS  Or  LETTERS  OP  CREDIT. 


To  explain  further  this  system,  we  shall  transcribe  the  form  of  the  bill 
referred  to  in  the  above  letter,  and  also  the  forms  of  the  bills  issued  by 
two  banks  at  Glasgow. 


.Vo.  130. 


York,  7th  June,  1342. 


Exchange  for  £  Sler.  300 


Six  Months  after  light  ofthi*  Firtt  of 

Exchange  (Second  and  Third  unpaid)  pay  to  the  order  of  Davit, 
Brook*,  £  Co.  Three  Hundred  Pound*  Sterling,  value  received, 
aiadvittdby 

Your  obedient  tenant, 

OEO.  D.  CARTER.* 


Palmer*,  UacJaUop,  Dent,  £•  Co., 
London. 


•  Tata  bffl 


"  Pay  George  D.  Carter,  or  order.  -  Davit,  Brook*,  f  Co." 


Remittances  to  India. 


-Vo.       £ 

FOR  FIRST  OF  EXCHANGE. 
WESTERN  BANK  OF  SCOTLAND. 
13 
To 

I  hereby  engage  to  accept  and  to  pay  at  Ma- 
'nnty,  the  first  presented  Bill  of  the  set  of 
Exchange,  of  which  the  annexed  is  the 
First,  to  be  drawn  by 
on  the  Western  Bank  of  Scotland,  on  or 
before 

at  Sixty  days'  sight, 

provided  this  Letter  of  Credit,  as  annexed 
to  such  Bill,  be  presented  therewith  and  de- 
livered to  me  on  acceptance  thereof. 
For  the  Western  Bank  of  Scotland,  Glas- 
gow, \  Manager. 

THIRD   OP  EXCHANGE. 


CLYDESDALE  BANK,  GLASGOW. 
To 

We  hereby  engage  to  accept  and  to  pay 
at  maturity  the  first  presented  Bill  of  the 
set  of  Exchange  of  which  the  annexed  is 
the  Third,  to  be  drawn  by  you  on  us,  on  or 
before  the  for  £ 

say  Sterling, 

payable  in  London  at  a  date  not  less  than 

and  not  exceeding 

days'  sight,  provided  this  Letter  of  Credit 
be  delivered  to  us  on  acceptance  of  the  an- 
nexed Bill. 

For  the  Clydesdale  Banking  Company. 


No. 


13 


Si.rty  Days  after  Sight,  pay 
this  First  of  Exchange  (Second  and  Third 
of  same  tenor  and  date  unpaid),  to  the  or- 
der of 

at  Messrs.  Jones,  L'oyd,  $•  Co.'s,  London, 
value  received  as  advised. 

To  the 
Western  Bank  of  Scotland, 

Glasgow. 
No. 

£  18 

after  sight  pay  this  Third  of 
Exchange  (First  and  Second  of  the  same 
tenor  and  date  unpaid),  to  the  Order  of 


in  London 


Value  received  as  advised. 
To 


Sterling, 


The  Bank  of  England  had  their  attention  called  to  this  subject,  and 
consequently  issued  expressly  for  remittance  to  India  bank  post  bills  drawn 
at  sixty  days'  sight.  The  following  account  of  this  arrangement  is  taken 
from  a  city  article  of  the  Times  :  — 

"  Some  inquiries  having  been  made  as  to  the  origin  of  the  bills  at  60  days'  sightt 
drawn  by  the  Bank  of  England,  alluded  to  the  other  day,  and  the  mode  in  which  the 
operation  is  conducted,  the  following  information  may  he  found  acceptable  :  — 

"  About  the  year  1836,  the  bills  of  the  East  India  firms  had  been  brought  into  tem- 
porary discredit  by  some  failures  which  happened  at  the  time,  so  that  these  bills  did 
not  find  ready  purchasers  in  the  Bombay  market.  It  was  conceived,  therefore,  that  a 
new  sort  of  paper  of  unquestionable  credit  might  be  introduced  into  India  with  advan- 
tage, and  nothing  seemed  more  fitted  for  this  purpose  than  bills  made  by  the  Bank  of 
England,  and  payable  by  themselves.  A  resolution,  passed  in  April,  1836,  authorized 
the  issue  of  the  required  paper,  and  since  that  time  it  has  been  in  use. 

"  And  now,  with  respect  to  the  mode  of  operation.  A  party  who  wishes  to  remit 
money  to  India  applies  to  the  bank  by  filling  up  the  following  form,  to  which  a  list  is 
attached,  and  pays  (of  course  at  par)  for  the  bills  which  he  takes  :  — 


1 '  To  the  Cashiers  of  the  Bank  of  England. 


'  London, 


"  '  request  to  be  furnished  with  the  undermentioned  bills,  at  60  days 

sight,  in  triplicate,  amounting  to  £  ,  the  firsts  to  be' accepted  and  held  by  the 

343 


A  TVeo/tM  on  Banking. 

Bank  of  England,  for  the  purpose  of  being  delivered  to  the  holders  of  the  second*  or 
third*,  whichever  may  be  Am  presented.' 


M  The  MB*  to  obtained  art  remitted  to  India,  nnd  bare  a  peculiar  ad\  uma^c,  «  Inch 
•    ••    •:  ......  hat  the  '  Ants  '  are  to  be  ai  .  •  ;•:.  .!  ;m.i  h.-M 

by  the  Bank  oY  England.    The  paper  which  i*  drawn  bra  fknj  in  India  on  London  .  i- 
gvejerally  made  parable  at  CO  day*  hut  the  60  days  do  not  begin  to  run  nil 

after  tkor  acceptance  in  London.    The  bank  paper,  on  the  <  outran-.  Ix-ing  accepted  m 
o»^  and  held  for  the  pnrpoee  of  being  to  the  holders  of  t)  '  and 

'thirds,'  in*  10  dart  bctrin  to  run  from  the  date.  :m<l  the  hills  arc  jmyul.li-  imm<  .' 
on  their  return  to  London  from  India.    This  advantage  and  the  iin<|iie«tioniihle 
of  the  paper,  often  enable  the  holder  to  dispose  <>f  tin  m  at  a  pood  premium  in  tin  In- 
dia market  in  certain  state*  of  the  exchanges,  and  thus  they  become,  as  it  were,  an  ui  • 
;.  •:,  ,.<  ,  .  mm  r.  < 

*  Notwithstanding  die  adrantage*  of  this  paper,  it  is  not  so  commonly  n-<  •.! 
might  be  imagined.  This  is  attributed  to  tin-  <  ompetition  of  some  of  tin-  S<  otch  ) 
who  offer  an  Inducement  fur  the  circulation  of  their  own  paper.  The  Hank  of  Knglnnd 

Kno  ratrrest,  treating  the  60  darn'  hill  JUM   a-  they  would  treat  an  ordinn. 
hare  the  use  of  the  money  paid  during  all  the  time  that  the  hill  i-  performing  its 
voyage  to  India,  U  finding  a  customer  in  the  Indian  market,  —  a  slow  process  in 
•Met*  of  the  exchange*,  —  and  is  returning  home.     The  Scotch  firm*,  on  the  contrary, 
allow  interest  daring  this  time,  or  a  portion  of  it.  and  thus  the  capital  of  the  !,<>!.  I<'T 
doe*  not  lie  completely  idle.    Hence  a  preference  is,  in  many  in-tame-.,  pven  to  the 

S   pi  ..    •.:  :..- 

IV.  REGULATIONS    FOR   SETTLING   THE    BANK    EXCHANGES    AT   EDIN- 

BURGH. 

1  There  shall  be  ererr  Thursday  morning  an  exchanpc  of  the  note«  cullcctr.I  on 
Monday,  Tuesday,  and  Wednesday;  and  every  Saturday  an  •  •  the  i,.,;.  - 

xBerfe'il  on  Thursday,  Friday,  and  'Saturday.  The  Imlanccs  stnx  k  on  Sntunby  shnll. 
with  the  Gbwgow  and  country  exchange  receipts,  he  cettled  on  Monday.  The  ha! 
struck  on  Thursday  shall  be  nettled  on  the  same  day;  and  this  settlement  shall  inelmle 
the  country  exchange  receipts  of  Wednesday,  and  the  (llaspow  exchange  reeript-*  of 
Thursday.  The  exchange  on  Saturday  shall  not  be  interrupted  bv  holidays  ;  hut  uti 
theae  occasions  it  shall  commence  at  half  past  nine  o'clock  A.  M.  YVIu  n  Monday  is  a 
hoUdar,  the  settlement  shall  be  made  on  Tuesday. 

I.  When  exchange*  are  established  in  provincial  towns,  the  DOT.-;  r«.md  at  the 
exchaaging  agencies  there  must  wait  for  the  return  of  the  next  h»  al  «  -xehiinjrc  da\  . 
and  must,  under  no  pretext,  be  forwarded  to  meet  the  exchanges  in  Edinburgh,  or  at 
the  other  agencies. 

S.  All  pannents  of  balances  shall  l>e  made  in  exchequer  bills  of  £  1.000  each,  the 
of  the  ba 


balance  to  indicate  the  number  of  exchequer  hills  ;  it  lx  inp  under- 
stood, that  Bank  of  Scotland.  Royal  Bank,  or  Hriti-h  Linen  Company  noK  s  of  £  ion 
each,  or  Bank  of  England  notes  o'f  £  100  and  upwards,  or  gold,  .-hull'  lit-  employed  to 
pay  fractional  parts  of  £  1,000  only. 

4.  The  amount  of  exchequer  bills  to  be  kept  in  the  exchange  circle  is  apportioned  as 
follows:  — 

Bank  of  Scotland  .        .        .    £24,000  Western  Bank         .        .    £24,000 

Roral  Bank       .....  24.000  '            !ale  Bank  .        .        .    12,000 

BrUsh  Linen  Company        .        24,000  Edinburgh  &  Glasgow  Bank    IJIMHI 

Commercial  Bank      .         .        .  24,000  City  of  Glasgow  Bank  .         .    12,000 

KMnnal  Bank       ....  - 

Union  Bank      ....  24,000  £204,000 

heqner  hills  put  into  the  circle,  to  l»e  filled  up,  payable  to  the  banks  which 
have  originally  contributed  them,  and  to  be  blank  indorsed  when  first  paid  away. 
Her  shall  be  registered  before  they  are  nut  intoth*-  rirelc.  in  a  hook  kept  in  the  Batik 
of  Scotland  for  the  purpose,  and  shall  bear  the  distinguishing  mark  of  "  Edinburgh 
Bill,"  affixed  by  the  Bank  of  Scotland,  showing  that  they  U-long  to 
not  to  be  used  for  any  other  purpose  whatever. 

844 


Scotch  Exchange  System. 

6.  All  the  exchequer  bills  placed  and  retained  in  the  exchange  circle  to  bear  a  uni- 
form rate  of  interest,  and  shall  be  paid  and  received  in  the  exchanges  at  their  nominal 
par  value,  with  the  interest  accrued ;  and  when  they  are  withdrawn,  in  consequence  of 
being  called  in,  or  from  an  alteration  in  the  rate  of  interest,  a  voucher  in  the  form  an- 
nexed (Schedule  A)  shall  be  issued  for  each  exchequer  bill  by  the  banks  by  whom 
they  were  provided  to  pass  as  such,  till  replaced  by  the  new  bills  iu  course  of  post  af- 
ter they  are  issued  from  the  exchequer. 

7.  As  exchequer  bills  may  be  expected  to  accumulate  occasionally  with  some  of  the 
banks,  while  the  stock  of  others  is  exhausted  or  becomes  low,  the  parties  holding  the 
greatest  amount  of  bills  shall  be  bound  to  sell  to  the  parties  in  want  of  them,  who 
shall,  on  the  other  hand,  be  obliged  to  buy ;  but  the  holders  shall  not  be  required  to 
reduce  their  stock  of  exchequer  bills,  by  selling  below  an  excess  of  two  thirds  over 
their  original  quota,  unless  necessary  for  the  settlements  ;  and  parties  whose  stock  of 
bills  is  short  shall  not  be  required  to  purchase  more  than  will  make  up  their  stock  to 
one  third  of  their  original  quota. 

8.  Purchasers  of  exchequer  bills  shall  buy  from  parties  holding  the  largest  propor- 
tional amount,  with  reference  to  their  original  quota,  and  two  thirds  more ;  and  the 
party  holding  the  largest  proportion  shall  have  a  continued  preference  in  selling  to  one 
or  more  purchasers,  until  the  stock  of  the  selling  bank  is  reduced  to  two  thirds  above 
their  original  quota,  when  the  next  largest  proportional  holder  at  the  time  shall  have 
the  preference,  and  so  on. 

9.  Exchequer  bills  bought  shall  be  paid  for  by  drafts  on  London  bankers  at  five 
days'  date  ;  and  the  purchasers  of  exchequer  bills  shall  pay,  in  addition  to  the  princi- 
pal sums  in  the  bills,  the  growing  interest,  at  the  rate  allowed  by  the  exchequer,  up  to 
the  date  of  the  drafts  falling  due  in  London,  and  shall  furnish  stamps  for  the  drafts. 

10.  Transactions  in  the  purchase  and  sale  of  exchange  bills  may  be  made  on  either 
of  the  settling  days  in  the  week  ,  but  they  shall  be  made  only  in  the  exchange-room, 
and  solely  for  the  settlement  of  the  exchange ;  and  no  private  transactions  of  this  kind 
between  bank  and  bank  shall  be  permitted,  so  that  the  number  of  exchequer  bills  in 
the  hands  of  any  one  party  after  the  exchanges  are  so  settled  shall  be  the  number  re- 
turned on  the  next  exchange  day. 

11.  In  the  event  of  any  exchange  draft  being  dishonored,  without  prompt  nnd  most 
satisfactory  explanation  of  the  cause,  the  bank  issuing  such  draft  shall  be  immediately 
excluded  from  the  clearing-room,  and  their  notes  shall  be  refused  in  all  future  transac- 
tions with  the  public. 

12.  The  exchanges  shall  be  made  alternately ;  on  Thursdays  in  the  Bank  of  Scot- 
land, and  on  Saturdays  (with  the  relative  settlement  on  Mondays)  in  the  Royal  Bank ; 
and  these  banks  will  undertake  to  receive  from  the  banks  which  are  debtors,  and  to 
pay  to  the  banks  which  are  creditors  in  the  exchanges,  the  exchequer  bills,  Bank  of 
England  and  other  notes,  and  gold,  which  are  passed  in  payment  of  the  balances;  but 
the  Bank  of  Scotland  and  the  Royal  Bank  shall  not,  nor  shall  either  of  them,  be  in 
any  way  responsible  for  the  exchange  transactions,  nor  otherwise  soever. 

13.  The  clerks  of  the  different  banks  shall  appear  in  the  clearing-room  at  ten  o'clock 
A.  M.  on  Thursdays  and  Saturdays,  and,  before  the  exchange  operations  commence, 
they  shall  write  down,  on  the  board  allotted  for  the  purpose,  the  amount  of  exchequer 
bills  held  by  the  banks  they  represent;  and  after  the  balances  are  struck  and  ascer- 
tained on  the  settling  days,  they  shall  mark  on  the  same  board  the  exchequer  bills 
which  will  be  in  their  hands  after  the  balances  are  settled  by  tbe  Bank  of  Scotland  and 
Moral  Bank  ;  and  this  is  to  be  considered  the  number  on  which  all  transactions  in  the 
purchase  and  sale  of  exchequer  bills  for  that  day  shall  be  founded. 

14.  After  the  balances  are  struck  on  Thursdays  and  Mondays,  statements  of  the 
name  shall  be  conveyed  to  the  respective  banks  by  their  own  clerks,  who  shall  afterwards 
attend  in  the  clearing-room,  to  pay  and  receive  the  balances  due,  at  half-past  eleven 
o'clock  on  Mondays,  and  at  half-past  three  o'clock  on  Thursdays,  after  the  vouchers  of 
the  balances  of  the  Glasgow  exchange  of  that  day  are  received.     These  arc  to  be  con- 
veyed, by  a  special  messenger,  from  the  Glasgow  banks  of  issue  alternately,  and  to  be 
delivered  by  him  personally  at  the  banks  to  whom  they  are  addressed  in  Edinburgh. 

15.  The  British  Linen  Company  having,  from  a  desire  to  promote  the  general  con- 
venience, consented  to  forego  the  advantage  they  have  hitherto  enjoyed  of  making 
their  whole  exchanges  with  banks  junior  to  themselves  within  their  own  office,  no  cer- 
tified statements  of  their  separate  exchanges  will  henceforth  be  necessary. 

16.  The  seventh  and  eighth  regulations  will  tend,  in  a  great  degree,  to  equalize  the 

345 


• 


A  Treatise  on  Banking. 

among  the  different  bank* ;  but  as  it  may  possibly  Imp- 
-changes,  tb.  >  i.ii;. 


mar  ntffinMWt  in  the  hands  of  one  bank  to  a  considemble  amount  beyond  n-.  ,JII.,M 
and  two  thirds  more,  withoot  the-  •  am  other  Lank.  a.  -,  ,,idmc  u 

above  regulation*,  then  that  bank,  when  (he  amount  on  hand  exceed- 
tb     Ml  :.     ' 


holding  the  fewest  innnU-r.  Although  not  u:  <>!  ilu-ir  quo- 

ta,'to  parr  ham  Up  to  tin  ir  ijimlu.  an. I  -••  on  to  tin-  next    lowest,  until  (lit-  >l<xk  ol    i;  . 
•ailing  bank  •hall  be  reduced  to  tho  original  <|iiota  ami  two  third-  • 

lia  annexed  Schedule  will  !-•  tin-  -m.lr  to  di-iin^ui-h  the  <  \n. 
of  the  seventh  and  eighth  regulations,  at  which  sales  and  purchaMs  ol  <  \. -In  ., n.  : 


bills  are  to  proceed. 

18   All  the  exchanging  banks  shall  have  free  access,  at  such  times  as  may  be 
ventent,  to  the  record  of  the  exchange  transactions. 

19.  The  subscriber*,  having  framed  these  regulations  with  the  \icw-  to  keep  the 
•  alion  of  Scotland  in  a  sound  state,  as  well  a-  to  -ive  facility  in  the  settlement  of 
their  balance  of  note*  issued  in  the  fair  way  of  business,  and  brin.- ..;'  i. pi-. ion  that  it  :- 
discreditable  in  a  bank  of  issue  to  |,.>,  ,  it,  note>  into  circulation,  by  e\<  haii-ini;  them 
for  Other  notes  in  the  circle,  they  resolve  to  check  uml  discourage  any  such  irregular 
iaMes  by  every  means  in  their  po«i  r 

50.  It  U  further  understood  and  agreed,  in  consideration  of  the  circulation  of  each 
bank  (other  than  what  may  he  issued  against  ^old  anil  >ihcr  coin)  b.  ii;^  tixed  and  lim- 
ited, by  the  Act  8&  '•  -.  that  the  banks   -.hall   brin-   to  the   exchange-room 
regularly,  at  their  head  office  and  agencies,  all  the  exchangeable  notes  which  il. 
oatve,  and  thatun.l.  r  :...  i  ircum-tanees  shall  any  bank  i--u.-  the  mites  ol  'another  bank 
of  issac  in  Scotland  without  permission  iii>t  MBSd  and  obtained. 

51.  The  parties  to  this  agreement  shall  he  entitled  to  withdraw  from  it,  and  to  r.  - 
oahre  back  their  exchequer  bills  at  their  par  value,  with  accruing  interest,  on  giving 

aths*  notice. 

FA.  16,  1846. 

ALEX.  BLAIR,  for  the  Bank  of  Scotland. 
K'Hii.KT  SVM  WILSON,  for  the  linyal  Hank  of  Scotland. 
THO.  CORRIE,  for  the  British  Linen  Company. 
KoitKRT  PACL,  for  the  Commercial  Hank  of  Scotland. 
GEORGE  CROSHIK.  for  the  National  Hank  of  Scotland. 
SAML  HAT,  Cashier,  for  the  Union  Bank  of  Scotland. 

i:  HAMSAY,  for  the  Western  Hank  of  Scotland. 
WILLIAM  FLKMMINO,  Manager,  Kdinlnir^h.  for  the  ( 'lydesdaleBank. 
ARCH.  BOSAR,  for  the  Kilinbiiru'h  i  (ila.^ow  Bank. 
BOBBRT  BELL,  for  the  City  of  Glasgow  Bank. 

VL  —  Exchange  Banks,  and  Exchange  Companies.* 

As  these  institutions  exist  only  in  Scotland,  they  may  fairly  be  classed 
among  the  banks  of  Scotland.  At  the  period  they  originated  I  \\mti-  tin- 
following  letter  to  the  late  Patrick  MaxwHI  S  .  <|.,  M.  1'.  for  Ren- 

frewshire, who  had  asked  my  opinion  on  the  subject.  This  letter  was  af- 
terwards published  in  the  Railway  ll-rnll. 

••  In  compliance  with  your  request,  I  will  now  give  you  my  notions  re- 
specting the  new  Exchange  Banks  recently  formed  in  Scotland. 

1.  A  division  of  labor  among  banking  institutions  is  by  no  means  a  new 
idea.  There  is  scarcely  any  bank  that  carries  on  every  branch  of  the  bu- 

•  .Veto  by  America*  PmUiiker — Those  who  are  canons  as  to  the  svstem  of  the  Kx- 
ehsssj*  Bank  System  of  Scotland,  aud  the  recent  failure  of  the...  butts,  are  referred  to 
the  Bankers'  Magazine,  published  at  Boston,  pp.  249-251,  and  2'.'* -.ml.  in  whi< 
able  views  of  the  London  Atlas  and  the  London  Hunkers'  Mu^u/inu  are  fully  given 

M8 


Scotch  Exchange  Banks. 

siness  of  banking.  The  dealing  in  foreign  exchanges,  which  forms  so 
largo  a  portion  of  the  business  of  Continental  bankers,  is  quite  unknown 
to  English  bankers  ;  it  is  confined  to  merchants,  or  to  large  moneyed 
houses,  like  the  Messrs.  Rothschild.  In  London,  the  West-end  bankers, 
as  Messrs.  Coutts  and  Messrs.  Drummond,  do  not  discount  commercial 
bills,  but  confine  their  advances  to  mortgages,  as  their  connections  lie 
chiefly  among  the  aristocracy ;  while  the  city  bankers  look  on  mortgages 
with  horror,  and  make  their  advances  by  the  discount  of  bills  and  short 
loans  on  personal  security.  Loan  Banks,  or  Monts  de  Piete,  have  been 
in  existence  for  several  centuries  as  a  distinct  branch  of  business, 
and  loan  societies  are  now  sanctioned  with  us  by  Act  of  Parliament. 
Some  London  bankers  do  not  take  the  agency  of  country  banks,  while 
the  agency  of  colonial  and  foreign  banks  is  often  taken  by  mercantile 
houses,  who  carry  on  no  other  part  of  the  business  of  bankers.  I  might 
add  to  these  illustrations,  but  these  are  enough  to  show  that  division  of  la- 
bor among  banking  institutions  is  accordant  with  every-day  practice,  and 
therefore  the  new  exchange  banks,  in  marking  out  for  themselves  a  par- 
ticular line  of  conduct,  cannot  be  charged  with  any  deviation  from  ac- 
knowledged principles. 

2.  But  then  comes  the  question,  Is  the  particular  department  of  bank- 
ing marked  out  for  themselves  by  the  new  exchange  banks  sufficiently  ex- 
tensive to  justify  the  formation  of  banks  for  that  particular  department,  and 
also  sufficiently  lucrative  to  justify  the  anticipation  of  profit  to  the  share- 
holders ?     With  regard  to  the  extent,  there  can  be  no  doubt  that,  from  the 
formation  of  railways,  and  the   multiplication  of  companies  of  all  sorts, 
those  kinds  of  securities  on  which  commercial  banks  do  not  like  to  make 
advances  are  largely  on  the  increase.     It  is  likely,  too,  that  these  ex- 
change  banks  would  attract  much  business  in  the  way  of  advances  on 
goods,  &c.,  which  is  now  done  by  brokers  or  individual  capitalists.     With 
regard  to  profit,  it  is  well  known  that  loans  on  the  kind  of  security  taken 
by  the  exchange  banks  are  always  charged  a  higher  rate  of  interest  than 
commercial  bills. 

3.  One  reason  for  the  formation  of  banks  to  take  up  this  particular  line 
of  business  is,  that  it  requires  a  peculiar  kind  of  knowledge  in  the  mana- 
ger.    He  must  make  himself  acquainted  with  certain  points  of  law  con- 
nected with  shares,  with  the  value  of  all  shares  in  the  market,  the  history 
and  prospects  of  each  company,  the  law  and  practice  with  regard  to  bond- 
ed goods,  and  other  matters  that  do  not  usually  come  under  the  notice  of 
the   manager  of  a  commercial  bank,  and  the  knowledge  of  which   he 
could  not  readily  acquire  and  maintain  without  neglecting  other  matters 
of,  to  him,  greater  importance. 

4.  Although  the  rate  of  interest  obtained  by  the  exchange  banks  will 
be  higher  than  what  is  termed  the  market  rate,  yet  it  will  be  affected  by 
the  market  rate,  and  hence  I  think  an  exchange  bank  cannot  yield  a 
high  dividend  to  its  shareholders,  unless  it  transacts  a  large  amount  of  busi- 
ness.    The  only  deductions  from  the  interest  received  must  be  the  ex- 
pense of  the  establishment.     Every  commercial  man  knows  that  a  large 
establishment  can  be  conducted  with  a  less  proportional  expense  than  a 
small  one.     To  conduct  even  a  small  business  with  safety,  an  exchange 

:m 


A  TreatUe  on  Banking. 

bank  must  have  a  first  rate  manager ;  but  us  the  business  increases,  the 
mow  iBtiBMn  transacts  the  incn-nnnd  business,  and  the  chief  increased 
"iqtntt  is  in  tho  number  of  clerks.  In  a  large-  bank  the  exju  n»<  ma\ 
form  •  smalt  proportion  to  tho  profit*  ;  in  u  small  bank  the  <  \,«  DH  may 
equal  the  profits,  or  even  exceed  them.  To  do  u  lar-i-  husim  s.-,  of  course 
an  exchange  bank  must  him*  n  large  capital. 

5.  After  a  while,  those  exchange  Uinks  may  obtain  funds  beyond  their 
own  capital.    The  commercial  bunks  <>l>tain  such  funds  by  tin:  issue  of 
notes,  the  balance  of  drawing  accounts,  lodgments  on  deposits,  and  the 
issue  of  drafts  on  London  and  elsewhere.     None  of  these  means  are 
adapted  for  exchange  bunks,  except  the  lodgments  on  deposits.     After 
they  are  better  known  to  the  public,  perhaps  they  may  be  able  to  receive 
deposits  for  three,  six,  or  twelxe  months  certain,  on  \\lnch  they  may  alloni 
to  allow  higher  interest  than  is  allowed  by  the  commercial  banks.     Possi- 
bly some  persons  may  prefer  lending  to  these   hanks  on  liberal  interest 
rather  than  lending  on  mortgage.     Any  large  extent  of  this  business 
would,  of  course,  add  proportionably  to  the  profits  of  the  bank. 

6.  1  know  of  no  better  form  of  government  for  an  exchange  bank  than 
a  board  of  directors  and  a  manager.     Commercial  banks  find  a  I 
board  useful,  as  the  number  of  directors  exalt  the  bank  in  public  estima- 
tion, and  extend  its  influence,  but  with  an  exchange  bunk  a  small  number 
of  efficient  directors  would  bo  preferable.     Hut  all  hanks  should   avoid 
what  are  called  "  managing  directors."     A  manager  is  selected  be< 

he  has  had  a  banking  education,  and  has  obtained  banking  experience. 
Orer  him  are  placed  two  directors,  who  have  had  no  banking  experience. 
The  manager  is  thus  reduced  to  a  clerk,  and  having  neither  power  nor 
responsibility,  he  has  no  stimulus  to  exertion.  The  managing  directors 
being  members  of  the  board,  their  brother  directors  do  not  scrutini/e  their 
acts  so  closely  as  they  would  the  acts  of  the  manager.  These  other  di- 
rectors thus  become  ciphers.  A  bank  thus  governed  resembles  a  private 
bank  with  two  partners,  with  this  difference,  that  the  private  bankers  un- 
derstand their  business,  and  deal  with  their  own  money.  The  main  ob- 
jects of  managing  directors  are  to  direct  the  manager,  and  to  manage  the 
directors.  Most  of  the  English  joint-stock  lumks  that  have  gone  astray 
have  been  either  constitutionally  or  practically  governed  by  managing  di- 
rectors. The  great  object  of  the  exchange  bunks  should  be  to  manage 
their  affaire  prudently  ;  though  a  large  business  is  essential  to  good  profit, 
yet  they  should  not  attempt  a  large  business  with  a  small  capital.  Let 
them  get  a  large  paid-up  capital  first,  and  the  large  business  will  come  of 
course.  The  main  danger  to  which  they  are  exposed  is,  that  they  may 
attempt  to  get  on  too  fast 

7.  An  obstacle  to  the  progress  of  these  banks  is  the  stamp  duties  on 
the  transfers  of  shares.    1  trust  these  and  all  other  banks  and  companies 
will  use  their  influence  to  get  these  duties  abolished.    In  political  economy, 
there  is  no  proposition  capable  of  clearer  demonstration  than  that  dom- 
taxes  on  the  transfer  of  property  are  pernicious.     Our  Government  serm 
*o  have  recognized  this  principle  last  session  in  their  spontaneous  surren- 
der of  the  auction  duties.     There  is  no  more  reason  in  laying  a  tax  upon 
the  sale  of  railway  shares  than  there  would  be  in  laying  a  tax  upon  the 


Scotch  Exchange  Banks. 

sale  of  iron  and  timber.  It  will  be  a  happy  thing  if  the  formation  of  ex- 
change banks  should  have  the  effect  of  causing  these  taxes  to  be  repealed. 
You  will  perceive  from  what  I  have  written  that  my  opinions  are  in 
favor  of  these  exchange  banks.  Presuming  they  will  be  well  managed 
(for  without  good  management  no  bank  can  succeed),  I  think  they  will  be 
found  profitable  channels  for  the  employment  of  capital,  and  after  a  while 
may  worthily  take  their  place  side  by  side  with  the  other  banking  estab- 
lishments of  Scotland." 

The  following  extracts,  from  a  letter  addressed  in  March,  1847,  by 
George  Kinnear,  Esq.,  the  manager  of  the  Glasgow  Commercial  Ex- 
change Company,  to  Alexander  Blair,  Esq.,  the  treasurer  of  the  Bank  of 
Scotland,  point  out  the  difference  between  the  business  of  those  compa- 
nies and  that  of  the  Commercial  Banks  :  — 

"  The  advances  of  exchange  companies  are  all  made,  irrespective  of  commercial 
credit,  on  the  security  of  shares  in  joint-stock  companies.  Although  these  shares  pre- 
sent the  most  undeniable  and  complete  security,  they  do  not  present  what  all  prudent 
bankers  understand  by  a  legitimate  banking  security.  Every  banker  knows  that  he  might 
as  well  devote  his  funds  to  lending  over  land  as  over  shares ;  that  when  he  does  so,  he 
in  reality  abstracts  his  funds  from  banking,  and  to  that  extent  loses  his  banking  power ; 
and  that,  just  in  proportion  as  he  does  so,  he  must  be  prepared  to  give  up  his  commer- 
cial business. 

"  It  is  this  which  has  induced  prudent  bankers,  not  only  in  Scotland,  but  everywhere 
else,  to  repudiate  such  transactions  as  inconsistent  with  the  prosperity  of  their  commer- 
cial business.  They  do  occasionally  lend  a,  customer  over  his  shares,  as  they  also  oc- 
casionally lend  a  customer  over  the  security  of  his  title  deeds,  but  they  regard  both  as 
equally  foreign  to  their  legitimate  business,  and  are  well  aware  that  if  they  practised 
either  for  any  length  of  time  they  would  ruin  their  legitimate  commercial  trade." 

"  The  Commercial  Exchange  Company  allows  interest  at  5  per  cent,  on  deposits  for 
six  months  certain,  and  repayable  at  three  months'  notice.  The  Bank  of  Scotland 
allows  interest  at  4  per  cent,  on  deposits  repayable  at  call.  I  may  appeal  to  any  re- 
spectable banker,  bill  broker,  or  money  dealer  of  any  kind,  if  a  difference  of  one  per 
cent,  per  annum  is  too  much  between  money  for  nine  months  certain,  and  money  at  a 
moment's  notice  ?  I  maintain  that  it  is  not ;  and  that  the  extra  one  per  cent,  which 
we  pay  is  justly  due  on  account  of  the  superior  character  of  the  article  which  we  re- 
ceive." 

"  The  whole  of  the  money  lent  by  the  Commercial  Exchange  Company  is  at  the 
rate  of  6i  per  cent,  per  annum,  and  is  lent  for  six  months  at  a  time.  On  all  six 
months'  paper  the  Bank  of  Scotland  charge  6  per  cent.,  so  that  the  Commercial  Ex- 
change charge  only  one  half  per  cent,  more  than  the  Bank  of  Scotland.  Nor  is  this 
half  per  cent,  charged  for  nothing ;  as  the  bank  has  no  trouble  in  taking  hills  at  six 
months,  while  the  Exchange  Company  has  the  trouble  and  risk  of  taking  over  securi- 
ties, .and  of  renewing  and  changing  them  for  the  parties  as  they  may  desire." 

"  The  Exchange  Company  allows  5  per  cent,  for  money,  and  charge  64  per  cent., 
making  a  fixed  difFerence  in  favor  of  the  company  of  1 4  per  cent.  The  Bank  of  Scot- 
land allows  on  current  accounts  3£  per  cent.,  on  deposit  receipts  4  per  cent,  and 
charges  on  hills  under  four  months  5  per  cent.,  and  above  four  months  6  per  cent. ; 
making  a  difference  in  favor  of  the  bank  varying  from  one  per  cent,  up  to  2i  per 
cent." 

"  The  directors  of  the  Commercial  Exchange  Company  have  allowed  to  the  public 
5  per  cent,  on  money  deposited  with  them  ;  and  they  have  done  so,  although  the  Bank 
of  Scotland  and  the  Royal  Bank  only  allow  4  per  cent." 

"  If  money,  repayable  on  demand,  be  worth  to  these  banks  4  per  cent.,  it  follows  as 
a  matter  of  course,  that  money  for  six  months  certain,  and  repayable  at  three  months' 
notice,  ought  to  be  worth  5  per  cent." 

"  I  beg  of  you  to  recollect  what  class  of  people  it  is  who  are  the  great  majority  of 
depositors.     Mostly  persons  incapable  of  working,  —  maiden  ladies,  widows,  and  or- 
phans,—  people  incapable  of  making  the  most  of  their  money  for  themselves,  —  nay, 
DD  349 


A  Treati*  on  Banking. 

nrast  of  them,  either  from  th«ir  sex  or  their  ignorance  of  business,  hutllj  capable  of 
judging  where  their  noney  It  tafr. 

"It  »  a  v««nr  great  pleasure  to  me  to  know  that  the  estal>li>limcnt  of  the  .  \ 
e«n  of  great  serrico  to  thi»  class  of  prntons.    Hundreds  ,.i 
have  Md  ibeir  comforts  increased,  ny  the  increased  intere.it  the 


dcrirv  from  the  money,  on  the  produce  of  which  tlicy  arc  obliged  tu  live  ,  m,,|  1  i 
to  brlitve,  that  thousands  will  \.-t  t  n  .  \  .-iiuilar  ben. 

i  lie  exchange  companies  no  more  coni|>cio  with  bank*  than  <l>  the  river  : 

:.,.;•       v  com]  I    !•  •'••  :M:-(S.  .in.  I  nlli.T  puMie  nndc  M.ikili;.--.  who  |..,r- 

:>oney  for  lengthens!  period*.  There  is,  in  fnct.  no  possible  room  for  jealot^  or 
competition  between  bank*  and  axchang*  COBIpaaiaB,  fee  there  is  im  business  under- 

taken  by  the  one  which  could  bo  accepted  of  i.\  ;ir  otb.  -r  \\iih  iiny  .-.il'.-ty  or  |iroj<ii<-iy. 

>urM*lf  arknouii  .!_-.•  th.it  tin-  IJank  nf  ^(•<ltlulld  (oitld  not  nllonl  to  i. 
BMNWJT  Ott  deposit  f<>r  nine  im>ii;h>  certain  at  .*>  percent.;  am!   I  (ussuro  you  the  ('nni- 
merrial  Exchange  Com|mny  ctmlil  not  uftonl  to  ^m-  I  per  cent,  lor  nn'iicy  at  call." 

••  \'.  :  ,  the  siniillot  I'.e^n  e.  injuie  or  interfere  with   tin-   prosperity  of  <-din- 

mdKial  banking  ;  on  the  contrary,  the  establishment  of  exchange  companies  inu-t  !m\e 
giren  a  very  acceptable  apology  to  pnulent  bankers  for  ileclinin^  to  mnke  a<K:ii; 
their  customers  on  securiti>-s.  which  (although  i|iiitc  p>o<l  in  theni-clvcs)  are  as  fun  i_-:i 

:.nt  banking  M  advancing  money  on  inort^ap-  over  land.'' 

>V(uU  you  call  e\  i!s  an-  in  f.ict  ^-reat  public  U-nclits.  l-'ir»t.  by  conferring'  Mil'sfan- 
tial  adrantagec  on  a  certain  class  of  depositors  :  inn!  .-e(  •ondly.  l-\  »  •nablin^  the  inteni:il 
improvements  of  the  country  to  be  carried  out  with  an  case  and  rapidity  vliii  -h  cuuld 
not  otherwise  be  attained." 

Tho  ExchruiLT''  Hunks  and  Companies  that  have  been  formed  in  Scot- 
land arc  the  following  :  — 

1.  The  Exchange  Bank  of  Scotland,  at  Edinburgh. 

2.  The  Commercial  E.vli:i!r_'-'  (  'mn]i;iny,  ;it  (llas^ow. 

3.  Tin:  I'liion  Exchange  Company,  at  (;ias-_r«'\v. 

4.  The  National  Exchange  Company,  at  Glasgow. 

5.  The  Glasgow  Exchange  Company,  at  Glasgow. 

6.  Thfe  West  of  Glasgow  Exchange  Company,  ut  Glasgow. 

1.  The  Exchange  Bank  of  Scotland.  —  This  bank  has  a  charter  under 
Sir  Robert  Peel's  Act  of  1845.     Its  paid  up  capital  is  .£350,000,  and  it 
has  about  ^400,000  deposits.     It  cannot  issue  notes.     In  making  pay- 
ments it  issues  the  notes  of  the  City  of  Glasgow  Bank.     It  bus  paid  a 
dividend  of  6  per  cent. 

2.  The  Commercial  Exchange  Company.  —  This  bank  has  no  charter. 
s  established  before  the  passing  of  the  Act  of  1K15,  but  not  i. 

i  until  after  the  passing  of  the  Act.  It  has  since  registered,  and 
hence  the  directors  consider  that  they  are  entitled  to  carry  on  Im-.M-ss  as 
a  bank  without  a  charter.  The  extracts  we  have  mad.-  from  the  pam- 
phlet of  Mr.  Kinnear,  the  manager  of  this  bunk,  will  show  the  principles 
on  which  it  is  condu 

3.  The  Union  Exchange  Company  of  Glasgow,  does  not  profess  to  be 
a  bank  at  all,  and  hence  avoids  the  question  of  a  charter.     At  a  special 
general  meeting  of  shareholders,  held  in  November,  1846,  it  was  resolved 
u  that  the  word  *  banking1  be  omitted  from  the  name  or  firm  of  the  Com- 
pany, as  prescribed  by  the  first  article  of  the  contract  of  copartnery,  and 
from  the  description  of  companies  referred   to    in   tin-  third  article  of 
contract  ;  and  that  a  special  declaration  be  added  to  the  said  third  clause 
of  the  said  contract,  that  it  has  not  l>een,  and  docs  not  form  any  part  of 

350 


Scotch  Exchange  Batiks. 

the  business  of  the  company  to  make  advances  simply  on  personal  secu- 
rity, unaccompanied  by  the  collateral  security  of  real  or  personal  proper- 
ty." Its  paid-up  capital  is  about  £  250,000,  on  which  it  has  paid  a  divi- 
dend of  7 1  per  cent. 

4.  The  National  Exchange  Company.  —  This  company  has  been  very 
unsuccessful.     It  commenced  in  the  year  1845,  and  got  into  difficulties  at 
the  end  of  1847.    Their  first  paid  up  capital  was  .£210,790.     They  have 
since  made  a  call  of  £  2  a  share  more,  on  57,000  shares,  to  enable  them 
to  meet  their  liabilities. 

5.  The  Glasgow   Exchange  Company  began  business  in  1847,  and 
wound  up  creditably  in  1848,  returning  to  their  shareholders  4s.  per  share 
more  than  they  had  paid  up. 

6.  The  West  of  Scotland  Exchange  Investment  Company  is  winding 
up  its  affaire,  and  is  expected  to  return  to  its  shareholders  nearly  the 
whole  of  its  paid-up  capital,  —  about  £  120,000. 

The  losses  that  have  fallen  upon  exchange  companies  seem  to  have 
arisen  mainly  from  the  great  reduction  that  has  taken  place  in  the  price 
of  railway  shares.  The  following  observations  of  the  directors  of  the 
Glasgow  Exchange  Company,  with  reference  to  the  prosecution  of  their 
business,  appear  very  just  and  impartial :  — 

"  The  directors  will  first  state  the  negative  view  of  the  question.  From  the  nature 
of  the  transactions  which  form  the  general  business  of  exchange  companies,  their  suc- 
cess depends  chiefly  upon  a  high  state  of  the  prosperity  of  the  country,  and  particularly 
of  railway  enterprise.  The  main  object  of  nearly  all  who  enter  into  such  transactions 
is  to  realize  the  benefits  of  an  expected  augmentation  of  the  value  of  the  stock ;  the 
business,  therefore,  is  necessarily  attended  with  risk,  and  though  that  risk  may  be 
guarded  by  what  appears  an  ample  margin,  recent  experience  has  shown  that  this  has 
not  been  a  sufficient  precaution. 

"  The  directors'  short  experience  may  not  give  much  weight  to  their  opinion  ;  but  it 
appears  to  them  to  be  essential  to  the  profitable  management  of  the  company's  business, 
that  it  should  possess,  in  addition  to  its  own  capital,  a  considerable  amount  of  money 
in  loans  from  the  public.  The  employment  of  such  money  is  the  chief  source  of  the 
profit  of  banking  companies,  and  this  advantage  is  still  more  required  by  exchange 
companies.  To  command  a  share  of  such  loans,  this  company  must  possess  the  confi- 
dence of  the  public :  what  might  tend  to  infuse  this  confidence  would  be  a  large  paid- 
up  capital ;  but  although  this  would  be  quite  requisite,  if  the  business  is  to  be  carried 
on,  yet  it  is  doubtful  how  far  it  would  remove  the  strong  prejudice  which  has  taken 
possession  of  the  public  mind  against  exchange  companies,  —  a  prejudice  which  is  a 
good  deal  mixed  up  with  the  injurious  effects  to  individual  fortunes  which  recent  bank- 
ruptcies have  disclosed,  as  arriving  out  of  transactions  with  exchange  companies. 

"  The  directors  will  now  state  what  has  occurred  to  them  in  favor  of  prosecuting  the 
business. 

"  The  magnitude  of  railway  stock  in  this  country  is  so  great,  that  it  may  be  fairly 
concluded  it  will  always  form  a  subject  of  extensive  dealings,  ami  that,  therefore,  there 
will  always  be  a  large  field  on  which  business  may  be  cultivated.  In  ordinary  times, 
the  risks  attending  the  business  of  the  company  would  not  be  much  ;  and  it  is  not  to 
be  expected  that  a  period  such  as  has  just  been  passed,  distinguished  by  extraordinary 
vicissitudes  in  the  value  of  public  securities,  will  often  occur. 

"  The  prejudice  which  exists  against  such  companies  at  present,  time  may  remove, 
for  it  does  not  appear  to  the  directors  that  the  grounds  of  that  prejudice  rest  on  any 
principle  that  would  not  apply  to  any  other  joint-stock  company ;  but  it  is  not  to  be 
concealed  that  the  existence  of  this  prejudice  will  be  an  obstacle,  for  a  time,  to  the  fa- 
cility of  increasing  the  paid-up  capital,  and  the  increase  of  loans  from  the  public,— 
both  essential  to  the  profitable  results  of  the  business  " 

351 


A  Trcalut  on  Banking. 


SUCTION  VII.  — THE   HANKS   OF   IKI'.I.AM) 

I  of  Parliament  f.»r  regulating  banks  in  Inland  is  the  8  &  9 

Viet.  <M;>   :<7,  passed  in  the  year  1s  !•• 

Thi*  '  ••'  by  tin-  Act  21  At  22  Geo.  III.  m  passed 

_«  a  Iwink  by  the  name  t.f  the  ( Jovernor  ami  ( 'ompany  of  :h,- 
Bnnk  of  Ireland  ;  and   which   prohibited  any  other  eomparu  i^  of 

n>. >n-  than  six  personate  issue  notes  payable  on  <!«•  main  I  or  within 
time  lev  than  six  months.     That  by  the  Act  1  A    -  <:••>.   IV.  ,•;:; 
other  companies  consisting  of  more  than  six  partners  n  i^ht  i— n«-  • 
payable  on  demand,  at  a  greater  distance  than  fifty  miles  (Irish)  fmm  Lon- 
don.    And  that  by  6  Geo.  IV.  cap.  42,  and   1  \Vm.   IV.  -\\<-}\ 
co-partnerships  of  bankers  might  transact  certain  matters  <.f  business  by 
agents  in  Dublin,  including  the  payment  though  not  the  issue-  of  i 

The  Act  further  recites  that  the  Hank  of  Ireland  h;.d  nt  various  times 
advanced  for  the  public  service,  the  several  sums  of  £  600,000,  £  f><  <>.- 
000  and  ,£1,250,000  late  Irish  currency:  ami  that  l.y  ','ne  is  (I,.,,.  HI. 
cap.  103,  the  charter  of  the  Bank  of  Ireland  was  extended  t<.  the  first  day 
of  January,  1837, —  upon  twelve  months'  notice  to  bo  pul.li.-hed  in  il.e 
Dublin  Gazette,  and  after  the  repayment  of  the  abore-inentioned  sums. 
And  that  by  the  Act  1  &  2  Geo.  IV.-cap.  72,  the  Bank  of  Ireland  had 
agreed  to  advance  a  further  sum  of  .£500,000,  and  the  hank  \\  as  em- 
powered to  enlarge  their  capital  to  £ 3,000,000;  n;  total  ad- 
vanccs  ^2,850,000  late  Irish  c-irrency.  e.pial  t..  .i'-.MWO.TfJO  4*.  Sd. 
sterling  money  of  the  United  Kingdom  of  (Ireat  Britain  and  Ireland;  on 
which,  by  the  Act  3  &  4  Viet.  c.  7">.  the  bank  n-eeived  an  annuity  from 
the  Government  of  £  115,384  12*.  4d.  sterling,  payable  on  the  f>th  of 
January  and  5th  of  July  in  each  year,  redeemable  upon  six  ir.i.nths'  no- 
tice, to  be  given  after  January  1st,  1841,  and  after  payment  of  ;l;e  above- 
mentioned  sums. 

The  Act  further  recites,  that  the  above  annuity  of  £  1 1  .">.:;•-  \  Ms.  4d. 
has,  with  the  consent  of  the  said  governor  and  com;  n  reduced 

to  ;£  92,076  18*.  5d.,  being  at  the  rate  of  3J  percent,  per  annum  «»n  the 
capital  sum  of  «£ 2,(i;K),769  4*.  6W.,  which  capital  sum  '-hall  I:«.T  be  re- 
paid until  the  expiration  of  six  months'  notice,  to  he  givu  af-'T  .I.-nuary 
1st,  1855  ;  and  that,  during  such  term,  the  said  governor  and  company 
nhall  manage  the  public  debt  free  of  all  charge.  The  company  is  to  ecu- 
tinue  a  corporation,  for  the  purpose  of  carrying  on  th<  <>f  bank- 

ing, but  not  to  have  any  exclusive  privileges.  The  charier  t<.  continue! 
until  the  expiration  of  twelve  months'  notice  to  be  given,  and  publisl  ed 
in  the  Dublin  (tmrtte,  after  January  1st,  1855,  and  upon  repayment  of 
the  sums  due  from  •  nment  to  the  bank. 

The  Act  removes,  from  the  6th  day  of  December,  1S45,  all  restric- 
tions upon  banks  having  more  than  six  par*  d  carry- 
ing on  business  in  Dublin,  and  within  fifty  miles  thereof.  Hut  i 
shall  issue  any  larger  amount  of  notes  than  tin  !md 
-  the  year  ending  the  first  day  of  '  liich 
amount  shall  be  certified  by  the  i.d  the 


The  Banks  of  Ireland. 

amount  of  gold  and  silver  coin  he  may  have  in  his  hands,  in  the  propor- 
tion of  not  more  than  one  fourth  of  silver  to  that  of  gold. 

In  case  two  banks  should  unite,  the  new  bank  to  have  the  power  of  is- 
sue  to  the  amount  of  both  the  united  banks.  Any  bank  may  arrange 
with  the  Bank  of  Ireland  to  give  up  its  issue  ;  and  in  that  case  the  Bank 
of  Ireland  may  increase  its  issue  to  that  amount.  But  the  bank  that  thus 
contracts  shall  not  afterwards  resume  its  issue.  All  notes  for  a  fractional 
part  of  a  pound  are  prohibited.  Each  bank  issuing  notes  is  required  to 
send  to  the  Stamp-office  weekly  returns,  stating  the  amount  of  notes  in 
circulation  on  each  Saturday,  distinguishing  those  below  £  5 ;  and  also 
the  amount  of  gold  and  silver  coin  held  at  each  of  the  head  offices  or  prin- 
cipal places  of  issue  in  Ireland.  And  from  these  returns  the  Commis- 
sioners of  Stamps  and  Taxes  shall  make  a  monthly  return,  which  shall 
be  published  in  the  Dublin  Gazette.  This  monthly  average  must  not 
exceed  the  amount  certified  by  the  commissioners  and  the  amount  of  gold 
and  silver  on  hand. 

All  banks  are  required  to  send  a  list  of  their  shareholders  to  the 
Stamp-office,  every  year,  between  the  1st  and  the  15th  of  January,  to  be 
published  in  the  Dublin  Gazette  before  the  first  day  of  the  succeeding 
March.  All  banks,  whether  they  issue  notes  or  not,  are  entitled  to  sue 
and  be  sued  in  the  name  of  their  public  registered  officer. 

Upon  the  Act  of  1845,  for  the  Regulation  of  Banks  in  Ireland,  we  may 
observe : — 

1.  The  authorized  issue  is  like  that  of  the  banks  of  Scotland,  the  aver- 
age amount  of  the  year  ending  on  the  1st  day  of  May,  1845. 

2.  If  any  two  banks  unite,  the  new  bank  may  issue  to  the  amount  of  the 
circulation  of  both  the  united  banks.    Here  the  law  is  the  same  as  that  of 
Scotland,  but  different  from  that  of  England. 

3.  If  any  bank  gives  up  its  issue,  and  agrees  to  issue  Bank  of  Ireland 
notes,  the  Bank  of  Ireland  may  increase  her  authorized  issue  to  the  full 
amount  of  the  issue  of  the  bank  whose  notes  are  withdrawn.     In  Eng- 
land, the  Bank  of  England  can,  in  a  similar  case,  issue  only  to  the  extent 
of  two  thirds  of  the  issue  of  the  bank  whose  notes  are  withdrawn.     There 
is  no  similar  provision  in  the  Act  referring  to  Scotland. 

4.  Another  difference  may  be  noticed  between  Ireland  and  Scotland. 
All  the  notes  issued  at  the  branch  banks  in  Scotland  are  payable  only  at 
the  head  office  of  the  bank  that  issued  them.     In  Ireland  all  the  notes  are 
legally  demandable  in  gold  at  the  branches  where  they  have  been  issued. 
Hence  the  banks  in  Ireland  must  keep  some  gold  at  every  branch,  while 
the  banks  in  Scotland  need  not  have  any  gold  except  at  the  head  office. 
In  both  countries,  the  banks  must  hold  a  stock  of  gold  equal  to  the  amount 
of  notes  in  circulation  beyond  the  authorized  issue  :  and,  according  to 
the  Act,  this  gold  must  be  at  the  head  office,  or  chief  place  of  issue.     The 
gold  held  at  the  branches,  however  necessary  for  business  purposes,  is 
not  taken  into  account  in  the  returns  to  the  Stamp-office.     The  banks, 
indeed,  return  the  whole  amount  of  the  gold  in  their  possession ;  and  it  is 
this  which  is  published  in  the  newspapers.     But  the  amount  held  against 
the  excess  of  authorized  issue  must  be  held  at  the  chief  office,  or  other 
chief  places  of  issue.     In  the  Provincial  Bank  of  Ireland  these  places  are 

DD*  353 


A  Trtatute  on  Banking. 
Cork,  Limerick,  Dublin,  and  Belfast.     They  are  desirous  of  having  .11  nd- 

'/    . .    "    Eridm&,  i  ".;>.; 

The  hanking  institutions  of  huli'm  nrr  the    Bank  of  Ireland.  \\ln 
chartered  kink,   like  the  Hank   of   Unhand.      It    is  tin-  ( ImrriimrMt  hank. 
]•  .  ••  -.   nnd    has  branches  in   tin-    |.nnci|.al  towns    through.-!'    In- 

land.    It  IMIS  i  vhisive  privilegea. 

The  I'mxincial  Hank  of  Ireland,  and  the  N;ition;il  Bank  of  In-lnnd 
These  arc  joint-stock  hanks  that  N  BOIMfOtM  btuche*. 

i  •  .  .     •          •.    rned  bj    boards   «•!'  direetors,  \\  I ieei  in    l.on- 

don. 

The    !  .k,  and   the   Royal    Bank    of  In-hind.      Tin-si-   arc- 

'•stock  banks,  that  <lo  not  issue   DOtM,  and    have  no  liranehes,  except 
tliat  the  HilxTiiian  Hank  has  a  branrh  at    Drogheda. 

The  private  banks  of  .Messrs.  I^a  Touchc  &•  Co.,  Messrs.  IJull  &  Co., 
and  Messrs.  Boyle,  Low,  Pim,  &  Co. 

There  are  three  joint-stock  banks  at  Helfast,  all  of  whic.b  issue  not.-s 
and  have  brandies.  They  are  the  Northern  Bunk,  the  Belfast  Bank, 
and  the  Ulster  Bank. 

There  is  also  a  joint-stock  bank  at  Tipperary,  which  does  not  issue 
notes,  but  has  several  branches. 

The  Bank  of  Ireland. 

In  tracing  the  history  of  hanking  we  may  observe  that  most  public 
banks  have  been  formed,  in  the  first  instance,  under  the  |>rot«  rtion  of  the 
Government  of  the  state  in  which  they  wen-  esiaMished.  Such  was  tin- 
case  with  the  banks  of  Venice,  Genoa,  and  Amsterdam  :  and  such,  too, 
was  the  case  with  the  banks  of  England,  of  Scotland,  and  of  Ireland. 
The  former  were  closely  connected  with  the  state,  and  may  properly  be 
called  "State  Banks";  the  latter  had  peculiar  privileges  bestowed  by 
charter,  and  are  usually  called  "Chartered  Banks."  These  privileges 
may  be  divided  into  two  classes,  those  which  refer  to  the  proprietors  them- 
selves, and  those  which  refer  to  other  parties.  The  privileges  of  the 
first  class  relate  to  the  amount  of  capital,  the  form  of  government,  the 
number  of  the  directors,  and  the  mode  of  their  nomination,  the  meeting 
of  the  proprietors,  and  the  specification  of  the  branches  of  business  the 
bank  are  allowed  to  carry  on.  The  privileges  of  the  second  class  refer 
to  the  restricted  liability  of  the  shareholders,  and  the  prohibition  of  other 
parties  carrying  on  die  same  business. 

If  the  charters  granted  to  banking  companies  referred  only  to  the  first 
class  of  privileges,  they  would  be  liable  to  but  little  objection.  In  the 
infancy  of  commerce  and  of  banking,  the  assistance  of  the  government 
may  with  propriety  be  granted  to  encourage  the  formation  of  institutions, 
Jo  eminently  calculated  to  promote  the  public  advantage.  But  of  what 
avail  are  prohibitory  clauses?  If  no  other  persons  are  disposed  to  form 
similar  institutions,  then  those  prohibitions  are  a  nullity  But  if  other 
parties  are  disposed  to  form  similar  companies,  without  the  assistance  of 
the  Government,  then  why  should  the  Government  interfere  at  all  ?  \Vhy 
should  they  grant  a  charter  to  effect  an  object  which  can  be  effected  with- 
out their  assistance  ? 

:<:>  i 


TJie  Bank  of  Ireland. 

In  the  charter  first  granted  to  the  Bank  of  England  in  1694,  there 
was  no  prohibitory  clause.  But  when  the  charter  was  renewed  in  1708, 
it  was  enacted  that  no  other  company  formed  of  more  than  six  persons 
should  carry  on  the  business  of  banking  in  England.  The  charter  grant- 
ed to  the  Bank  of  Scotland,  in  1695,  contained  the  following  prohibition, 
—  "That  for  the  period  of  twenty-one  years  from  the  17th  of  July  1695, 
it  should  not  be  lawful  for  any  other  persons  to  set  up  a  distinct  company 
or  bank  within  the  kingdom  of  Scotland."  This  privilege  was  not  re- 
newed after  the  expiration  of  the  twenty-one  years ;  and  in  the  year 
1727,  a  charter,  without  any  prohibitions,  was  also  granted  to  the  Royal 
Bank  of  Scotland.  In  the  year  1746,  the  British  Linen  Company  was 
formed,  and  carried  on  the  business  of  banking  as  a  joint-stock  company. 
Subsequently  this  bank  also  obtained  a  charter,  but  without  any  exclusive 
privilege.  Hence  Scotland  has  had  the  advantage  of  chartered  banks, 
and  joint-stock  banks,  and  private  banks,  all  working  well  together  with- 
out producing  those  effects  which  in  this  country  have  followed  the  prohib- 
itory clauses  of  the  charter  of  the  Bank  of  England. 

Both  in  its  constitution  and  government  the  Bank  of  Ireland  closely  im- 
itated the  Bank-  of  England  ;  and  it  has  produced  in  Ireland  most  of  the 
advantages  and  evils  which  that  establishment  has  produced  in  this  coun- 
try. It  has  supplied  the  country  with  a  currency  of  undoubted  solidity ; 
it  has  supported  public  credit,  it  has  granted  facilities  to  trade,  and  it  has 
assisted  the  financial  operations  of  the  Government.  On  the  other  hand, 
its  prohibitory  clause  necessarily  led  to  the  formation  of  many  private 
banks,  whose  failure  was  the  cause  of  immense  wretchedness  to  all  classes 
of  the  population. 

The  charter  of  the  Bank  of  Ireland  contained  a  clause,  which  prevented 
more  than  six  persons  forming  themselves  into  a  company  to  carry  on 
the  business  of  banking  in  Ireland.  In  the  year  1824,  they  surrendered 
this  exclusive  privilege,  as  far  as  regard  those  places  which  are  situated 
at  a  greater  distance  than  fifty  Irish  miles  from  Dublin ;  and  in  1826,  the 
Bank  of  England  made  a  similar  surrender,  with  regard  to  places  at  a 
greater  distance  than  sixty- five  miles  from  London.  As  eleven  Irish  miles 
are  equal  to  fourteen  English  miles,  fifty  Irish  miles  are  equal  to  about 
sixty-five  English  miles.  But  it  must  be  observed,  that  Dublin  is  situated 
on  the  sea-coast,  therefore,  the  Bank  of  Ireland  had  only  the  monopoly 
of  a  semicircle,  whose  radius  is  fifty  Irish  miles.  But  London,  being 
situated  inland,  the  Bank  of  England  had  the  monopoly  of  a  whole  cir- 
cle of  130  English  miles  in  diameter. 

The  Bank  of  Ireland  was  established  by  an  Act  of  Parliament  passed 
in  1782,  21  &  22  Geo.  III.  cap.  16.  The  following  are  the  provisions 
of  this  Act :  — 

The  capital  was  £  600,000,  which  was  lent  to  Government  at  4  per 
cent.  No  one  person  was  permitted  to  subscribe  more  than  £  10,000. 
If  the  bank  incurred  debts  to  a  greater  amount  than  their  capital,  the  sub- 
scribers were  answerable  in  their  private  capacity  to  the  creditors  in  pro- 
portion to  their  subscriptions.  The  bank  were  not  either  to  borrow  or 
to  lend  money  at  a  higher  interest  than  5  per  cent.,  nor  to  engage  in 
any  business  but  banking.  The  stock  to  be  transferable,  and  deemed 

355 


A  Trtatue  on  Banting. 

p*fftnt>**  estate,  and  a*  such  to  go  to  the  executors  of  the  holders,  and 
not  to  their  heir*.  No  trans  :•  '"k  stock  tu  be  valid,  unless  r< 

land  in  the  bank  books,  in  seven  days  from  the  contract,  and  actually 
transferred  in  fourteen  days  ;  the  charter  to  expire  at  twelve  months'  110- 
tice  after  the  1st  day  of  January,  17!)  I,  and  repayment  of  all  sums  due 
by  the  Government  to  the  bonk. 

"  The  charter  is  dated  May  15,  1783,  anil  contains  as  follows :  —  Such 
persons  as  should  subscribe  before  Januan,  1,  I"*- 1.  the  sum  of  £600 
were  to  be  formed  into  a  corporation,  to  be  styled  the  Governor  an<! 
Company  of  the  Bank  of  Ireland;  the  corporation  were  to  have  a  gov- 
ernor, deputy-governor,  and  fifteen  directors  ;  which  governor,  deputy- 
psjemor,  ai  l<  rectors,  or  anj  eight  or  more  of  them,  siu'l  he  called  a 
Court  of  Dip-ctors,  for  the  management  of  the  allairs  of  the  cor|>oration. 
n  directors  shall  be  chosen  annually,  between  March  'J5  and 
April  25  in  each  year,  and  not  above  two  thirds  of  the  directors  of  the 
preceding  year  to  be  reflected. 

The  notice  for  the  meeting  of  general  courts  of  proprietors  to  be  affixed 
upon  the  Royal  Exchange  in  Dublin  at  least  two  days  before  the  time  of 
meeting.  The  qualification  for  a  voter  at  a  general  court  shall  be  £  500 
stock,  to  be  held  for  six  months  preceding,  unless  it  come  by  will,  mar 
riage,  Arc.  The  qualification  for  Governor  shall  be  £4,000  stock,  and  for 
deputy-governor  £  3,000,  and  for  director  £  2,000. 

No  dividend  shall  at  any  time  be  made  by  the  said  governor  and  com- 
pany, save  only  out  of  the  interest,  profit,  or  produce,  arising  by  or  out 
of  the  said  capital,  stock  or  fund,  or  by  such  dealing,  buying,  or  selling, 
as  is  allowed  by  the  said  Act  of  Parliament ;  nor  without  the  consent  of 
the  members  of  the  said  corporation,  in  a  general  court  qualified  to  vote 
as  aforesaid. 

The  governor  or  deputy-governor  shall  summon  four  general  courts 
at  least  in  every  year.  One  in  the  month  of  September,  one  in  Decem- 
ber, one  in  April,  and  another  in  July. 

The  governor  or  deputy-governor  shall  also  summon  a  general  court, 
whenever  requested  to  do  so  by  nine  members,  each  holding  £  500  stock. 

If  governor  and  deputy-governor  be  absent  one  hour  after  the  usual 
time  of  proceeding,  at  any  general  court  or  court  of  directors,  a  chairman 
shall  be  chosen  for  that  time  only,  who  shall  have  like  privileges  as  the 
governor  or  deputy-governor. 

Governor,  deputy-governor,  or  chairman,  not  to  vote  in  general  co< 
or  court  of  directors,  save  when  there  shall  happen  to  be  an  equal  number 
of  votes  on  each  side. 

The  Bank  of  Ireland  commenced  business  at  St.  Mary's  Abbey,  June 
25,  1783.  After  the  Union,  its  office  was  removed  to  the  Parliament 
House. 

In  the  year  1821,  the  capital  of  the  Bank  of  Irrland  was  increaverl  from 
£2,500,000  to  £3,000,000  Irish  currency.  The  additional  .•:  500,000 
was  taken  from  the  bank's  surplus  fund,  and  lent  to  the  Government  at  4 
per  cent,  to  be  repaid  by  the  1st  of  January,  1838.  The  increased  capital 
was  divided  among  the  proprietors,  at  the  rate  of  £20  for  every  £  100 
they  possessed.  In  consideration  of  this  increase  of  capital,  the  bank 

356 


The  Bank  of  Ireland. 

consented  to  a  clause  in  this  Act,  whereby  persons  in  partnership,  resid- 
ing fifty  miles  from  Dublin,  might  carry  on  the  business  of  banking,  al- 
ihough  such  partnership  might  consist  of  more  than  six  partners  ;  but  that 
such  partnership  should  possess  no  other  privilege  than  being  allowed  to 
sue  and  be  sued  in  the  name  of  a  public  officer,  should  Parliament  here- 
after think  fit  to  grant  such  a  power.  This  privilege  was  of  little  prac- 
tical use,  for,  according  to  the  construction  put  upon  the  Act,  it  required 
that  all  the  partners  in  these  banks  should  reside  in  Ireland. 

In  this  year  an  Act  was  passed  (5  Geo.  IV.  cap.  73)  "  to  relieve  bank- 
ers in  Ireland  from  certain  restraints  imposed  by  the  provisions  of  the 
29  Geo.  II.,  and  to  render  all  and  each  of  the  members  of  certain  co- 
partnerships of  bankers,  which  may  be  established,  liable  to  the  engage- 
ments of  such  copartnerships,  and  to  enable  such  copartnerships  to  sue 
and  be  sued  in  the  name  of  their  public  officer." 

Those  clauses  in  the  former  Act  that  required  the  names  of  all  the 
partners  to  be  subscribed  to  the  notes,  and  which  prohibited  bankers  being 
traders,  are  by  this  Act  repealed.  Banking  partnerships  exceeding  six 
persons,  and  carrying  on  business  at  any  place  beyond  fifty  miles  from 
Dublin,  shall  be  registered  at  the  Stamp-office,  Dublin ;  and  also  the 
names  of  the  public  officers,  in  whose  name  such  partnerships  sue  and  are 
sued.  The  names  of  those  public  officers  were  also  required  to  be  sub- 
scribed to  all  notes  and  receipts  issued  by  the  company.  Judgments 
against  the  public  officers  to  operate  as  judgment  against  the  partnership, 
and  execution  upon  judgment  may  be  issued  against  any  member  of  the 
society,  and  the  public  officer  to  be  saved  harmless. 

In  the  year  1825  was  passed  the  "  Act  for  the  better  regulation  of  co- 
partnerships of  certain  bankers  in  Ireland."  It  \vas  obtained  by  the  di- 
rectors of  the  Provincial  Bank  of  Ireland,  as  the  Acts  previously  granted 
did  not  furnish  the  facilities  which  the  Provincial  Bank  required  for  the 
beneficial  exercise  of  its  operations.  It  confirmed  the  permission  granted 
by  former  Acts  to  establish  joint-stock  banks  at  a  greater  distance  than 
fifty  miles  from  Dublin,  and  permitted  persons  resident  in  Great  Britain 
to  become  shareholders  in  such  banks.  The  banks  were  required  to  re- 
gister at  the  Stamp-office  in  Dublin  an  account  of  the  names  of  the  firms, 
the  several  partners  therein,  and  the  public  officers  thereof.  The  partner- 
ships shall  sue  and  be  sued  in  the  name  of  their  public  officers.  Parties 
obtaining  judgments  in  Ireland  may  authorize  the  acknowledgment  of  like 
judgment  in  Great  Britain ;  and,  in  like  manner,  parties  obtaining  judg- 
ment ,in  Great  Britain  may  proceed  thereon  in  Ireland.  Judgments 
against  public  officers  shall  operate  against  the  society,  and  execution  upon 
judgment  may  be  issued  against  any  member  of  the  co-partnership.  All 
transfer  of  shares  must  be  registered  at  the  Stamp-office. 

In  this  year,  too,  an  Act  of  Parliament  was  passed  to  assimilate  the 
currency  of  Ireland  to  that  of  England.  It  is  entitled,  "  An  Act  to  pro- 
vide for  the  assimilation  of  the  currency  and  moneys  of  account  through- 
out the  United  Kingdom  of  Great  Britain  and  Ireland."  (6  Geo.  IV. 
cap.  79.)  The  Act  recites,  that  the  pound  sterling  in  Great  Britain  and 
Ireland  respectively  is  divided  into  twenty  shillings,  and  the  shilling  into 
twelve  pence ;  but  the  silver  coin  which  represents  a  shilling  in  Great 

357 


A  Treatise  on  Banking. 

Britain  b  paid  and  accepted  in  Ireland  fur  thirteen  pence,  and  ihr  pound 
sterling  orGreat  Bn'a-.n  i«,  at  the  par  of  exchange,  paid  and  Moeptod 

>ne  pound  one  shilling  and  right  pence  of  the  currency  of  Ireland  : 
and  that  great  complexity  of  accounts,  and  other  inconveniences,  arise 
from  the  said  difference  of  currencies.  It  i!  .  that  the  cum  n<-\ 

of  Great  Britain  shall  be  the  currency  of  the  I'nited  Kingdom,  and  all  re- 
oeipts,  payments,  contracts,  nnd  dealings,  shall  be  made  in  such  currency. 
And  all  contracts,  debts,  &c.,  made  or  contracted  previous  to  the  com- 
mencement of  this  Act  shall  be  carried  into  effect,  and  satisfied  by  pa\- 

:  in  British  currency  of  1'J-iyths  of  the  amount  according  to  Irish 
•  •  irrrncy.  All  duties  and  public  revenues,  and  all  funds  and  public  < 
shall  be  estimated  in  British  currency,  and  the  accounts  thereof  kept  ac- 
cordingly. After  a  day  to  be  named  by  proclamation,  British  silver  and 
gold  coins  shall  be  current  in  Ireland  at  the  same  rate  of  pence  as  in  Great 
Britain.  On  the  like  proclamation,  Irish  copper  coin  shall  be  brought 
into  the  Bank  of  Ireland,  and  exchanged  there  for  British  copper  coin,  at 
the  rate  of  twelve  pence  British  for  thirteen  pence  Irish,  and  the  Irish 
copper  coin  shall  cease  to  circulate.  Bankers1  notes  shall  be  mnde  pay- 
able in  British  currency.  No  notes  payable  in  Irish  currency  shall  be  re- 
issued  after  the  commencement  of  this  Act,  under  a  penalty  of  £  50  for 
each  offence.  Bankers  may  deliver  into  the  Stamp-office  re-issuable 
notes,  payable  in  Irish  currency,  and  receive  in  lieu  thereof  new  stamps 
to  the  whole  amount  of  the  stamps  delivered  up,  if  dated  within  one  year 
previous,  or  three  fourths  if  within  two  years,  and  one  hulf  if  within  three 

*.     This  Act  came  into  operation  on  the  5th  day  of  January,  iN'Ji;. 
Very  ample  returns  of  the  state  of  the  Bank  of  Ireland  are  published 
in  the  Appendix  attached  to  the  Reports  of  the  Parliamentary  Commit- 
tee*.   The  following  is  that  of  the  latest  date  :  — 

12rn  FEBRUARY,  1848. 

('imiUtion:  —  £  £  Securities  :  —  £  £ 

£5  and  above,      .1,867,300  Public,          .        .        .        .3,735,800 

Under,       .        .       1,232,900  Private,  viz. 

-  3,100,200  Notes  and  Bills 
Pspoiill  ;  —  <li>counted,  .      2,605,400 

Public,         .        .  1,336,600  .         All  other  Private 

Private  and  Son-  Securities,       .     536,900 

dry  Balances,  .      2,160,500  -  3,142,300 

-  3,497,100  Specie,     ....         808,500 

6,597,300  7,686,600 

This  account  includes  the  bank  and  the  branches.  The  circulation  of 
the  branches  was  :  —  £  5  and  above,  £  769,800  ;  under  £  5,  £  855,500  ; 
making  a  total  of  £  1,625,300.  The  deposits  at  the  branches  amounted 
to  .£564,800,  and  the  bills  under  discount  to  £  1,852,000. 

The  Bank  of  Ireland  has  branches  at  the  following  places  :  — 


Armagh, 

Bailinaaloe, 


Drogheda,  Longford,  Tullamore, 

Dundalk,  Maryborough,  ford, 

Cnlway,  New  ROM,  Westnort, 


,  , 

Cariow,  Kilkenny,  vry,  Wexford, 

'  •  mm,  EJsMrfei, 

' 


<  '"fk  Londonderry,  Tralec, 

358 


The  Provincial.  Bank. 

The  Provincial  Bank  of  Ireland. 

Public  banks  may  be  divided  into  three  classes  :  first,  Chartered  Banks, 
those  which  have  received  a  charter  from  the  crown ;  secondly,  Joint- 
stock  Banks,  formed  under  the  common  law  ;  and,  thirdly,  Joint-stock 
Banks,  formed  under  the  statute  law. 

The  common  law  of  England  allowed  any  number  of  persons  to  form 
themselves  into  a  partnership  to  carry  on  banking.  At  the  same  time,  it 
presented  this  inconvenience  in  the  formation  of  such  partnerships, — .in 
all  actions  at  law,  it  was  necessary  to  state  the  names  of  all  the  individ- 
uals who  composed  the  company.  Another  inconvenience  of  partnerships 
formed  under  the  common  law  was,  that  all  the  partners  were  answerable 
for  the  debts  of  the  company,  to  the  full  extent  of  their  property,  not  only 
while  they  were  partners,  but  after  they  had  ceased  to  be  partners,  as  far 
as  regards  any  transactions  that  took  place  during  the  continuance  of  their 
partnership.  The  banks  avoided  these  inconveniences,  in  the  first  place, 
by  conducting  their  business  in  the  names  of  trustees,  in  the  same  way  as 
some  of  the  insurance  companies ;  and  in  the  second  place,  by  inserting 
a  clause  in  the  deed  of  settlement,  that  in  case  the  bank  should  lose  one 
third  or  one  fourth  the  amount  of  its  paid-up  capital,  it  should  immediate- 
ly be  dissolved. 

The  statutes  6  Geo.  IV.  c.  42,  with  reference  to  Ireland,  and  7  Geo. 
IV.  c.  46,  with  reference  to  England,  not  only  repealed  those  Acts  of 
Parliament  which  prohibited  the  formation  of  banking  companies  having 
more  than  six  partners,  but  they  also  removed  the  inconveniences  of  the 
common  law.  It  was  enacted,  that  it  should  no  longer  be  necessary,  in 
legal  actions,  that  the  names  of  all  the  partners  should  be  placed  upon 
the  record ;  but  that  the  company  should  register  at  the  Stamp-office 
the  name  of  some  one  person  in  whose  name  they  wished  to  sue  and  be 
sued.  Any  party  who  had  a  disputed  claim  upon  the  company  must  sue 
this  public  officer,  and  when  he  had  obtained  a  verdict  in  his  favor,  he 
might  issue  judgment  against  all  the  partners,  in  the  same  way  as  though 
he  had  obtained  a  verdict  against  them  all.  And,  that  he  might  have  no 
difficulty  in  ascertaining  who  were  or  were  not  partners,  it  was  required 
that  the  names  of  all  the  partners  should  be  annually  registered  at  the 
Stamp-office.  The  statute  law  also  obviated  the  second  inconvenience  of 
the  common  law,  by  enacting  that  every  partner,  as  soon  as  he  had  trans- 
ferred his  share,  should  be  released  from  all  liability  as  to  the  subsequent 
act  of  the  company,  and  at  the  end  of  three  years  he  was  no  longer  liable 
for  any  acts  that  took  place  even  at  the  time  he  was  a  partner. 

The  Provincial  Bank  of  Ireland  was  formed  under  the  statute  of  6  Geo. 
IV.  c.  42.  Few  banks  have  in  so  short  a  time  advanced  to  so  high  a  de- 
gree of  prosperity.  The  circumstances  of  Ireland  at  that  period  were 
friendly  to  the  growth  of  such  an  establishment.  The  recent  abolition 
of  the  union  duties,  and  the  introduction  of  steamboats,  had  given  a  stim- 
ulus to  the  trade  between  the  two  countries,  while  nearly  all  the  banks  in 
the  south  of  Ireland  had  been  swept  as  by  a  whirlwind  from  the  face  of 
the  land.  The  operations  of  the  bank  were  also  facilitated  by  the  assimi- 
lation of  the  currency,  and  the  measures  taken  by  the  Government  and 

3*9 


A  Trratitt  on  Banking. 

the  Bank  or  Ireland  to  prevent  these  fluctuations  in  the  e\ehanges  which 
had  previously  existed.  But  the  prosperity  of  this  bank  must  IK-  attrihui- 
ed  chiefly  to  the  wisdom  nnd  prudence  manifested  in  its  constitution  and 
in  its  subsequent  government.  Tin-  capital  was  raised  chiefh  in  Kn^land, 
and  London  was,  consequently,  made  the  scat  of  government.  The 
hoard  of  directors  was  composed  of  merchants  and  statesmen,  and  the 
latter  were  taken  from  the  leading  men  of  the  two  parlies  into  \\hieh  In- 
land was  then  divided.  The  local  government  of  the  n 
in  Ireland  was  composed  of  directors  possessing  local  know  It -d-M-  and  in- 
fluence, and  of  managers  selected  tor  their  experience  in  hanking,  and 
the  manager  had  a  veto  upon  the  decision  of  die  board.  An  m-;  • 
was  appointed  to  visit  the  branches,  and  to  report  to  the  London  ollice. 

At  the  same  time,  the  bank  had  considerable  difficulties  to  contend 
against.  Property  in  Ireland  was  considered  insecure ;  political  and  re- 
ligious feelings  often  interfered  with  matters  of  business;  the  habits  of 
the  people  were  not  commercial ;  and  the  country  had  suffered  so  severe- 
ly from  private  banking,  that  confidence  was  not  easily  acquired  for  a 
new  company,  the  members  and  constitution  of  which  were  |>ut  imper- 
fectly known.  Before  these  difficulties  had  been  completely  overcome, 
the  bank  became  involved  in  a  competition  with  branches  of  the  Hank  of 
Ireland,  and  exposed  to  sudden  demands  for  gold  arising  out  of  political 


The  object  of  the  bank  is  thus  stated  in  the  original  prosj>ectus :  — 

"The  hank  to  have  a  capital  of  £.  2,000,000,  if  necessary,  suhsrrilml  in  sli.iros  of 
£.  100  each.  To  have  a  board  of  directors  in  I/ondon,  and  establishments  for  business 
in  the  principal  towns  of  Ireland  which  arc  distant  above  fifty  miles  In  mi  Dublin. 
At  earh  of  these  places,  a  part  of  its  stock  to  be  subscribed,  and  from  the  stockholders 
a  local  board  of  directors  to  be  chosen.  The  establishments  to  be  manured  l>y  .sternly, 
experienced  persons  sent  from  England,  with  the  advice  and  under  the  inspection 
of  the  local  directors,  but  subject  to  the  entire  control  of  the  London  board,  to  whom 
accounts  shall  be  regularly  transmitted." 

The  first  report,  delivered  by  the  directors  to  the  shareholders  in  May, 
1826,  stated  that  the  bank  had  the  following  nine  branches  :  — 

Opened.  Opened. 

Cork,        ....  Sept.  1,  1825  Wexford,  ....  Feb.  27,  1826 

Limerick,     .         .         .        Nov.    1,  1825  Belfast,          .         .         .        Mur.    1,  182G 

Clonmel,  .        .        .        .Nov.  15,  1825  Watcrford,        .         .         .May    1,1826 

Londonderry,       .        .       Dec.  12,  1825  Gal  way,       .        .        .       May    1,  lni'6 
Sligo,        ....  Feb.  20,  1826 

The  state  of  banking  in  Ireland  at  the  time  the  Provincial  Bank  was 
formed  is  thus  described  in  their  Eleventh  Annual  Report,  delivered  in 
May,  1836:  — 

u  To  show  the  progress  of  that  competition,  it  may  be  sufficient  to  i>tatc,  that  prior 
to  1825,  when  the  Act  6  Oeo.  IV.  o.  42  was  passed,  "under  which  th.-  l'n.\  iii.-iul  Bank 
WM  established,  the  Bank  of  Ireland  had  no  establishment  out  of  Dublin. 

"That  in  Dublin  iwelf  there  were  only  four  more,  and  t!,  banks;  and 

that  in  all  Ireland  betides  there  were  no  other  than  i.rivut.:  bunks,  and  these  onlv  in 
Belfast,  Cork,  Wexford.  and  Mallow. 

-oin  1825  to  1834,  banking  offices  in  the  chief  cities  and  towns  of  Ireland  had 

NO 


The  Provincial  Bank. 

been  gradually  established  by  the  Provincial  Bank,  the  Bank  of  Ireland,  the  Northern 
and  the  Belfast  Banks,  to  the  number  of  about' fifty  ;  while,  within  the  short  space  of 
the  last  two  years,  the  offices  of  joint-stock  banks  having  resident  managers  or  agents 
beyond  fifty  miles  from  Dublin,  added  to  the  branches  of  the  Bank  of  Ireland,  have 
increased  to  upwards  of  120,  and  appear  to  be  daily  augmenting  in  number;  besides 
which,  there  are  a  great  variety  of  stations  attended  on  market-days  by  non-resident 
agents,  on  behalf  of  one  or  other  of  such  banks  ;  and,  in  addition  to  all  these,  several 
establishments,  on  a  large  scale,  have  been  lately  announced  in  Dublin  as  in  con- 
nection with  some  of  the  joint-stock  banks  most  recently  formed  in  the  provinces. 

li  The  directors  cannot,  however,  regard  this  unexampled  rapidity  of  increase  in  the 
number  of  banks  as  a  certain  indication  of  prosperity.  Amidst  the  excitement  arising 
out  of  this  state  of  things,  they  have  considered  it  to  be  their  duty  to  impress  upon  all 
their  local  directors  and  managers  the  necessity  of  increased  caution  and  vigilance,  and 
to  warn  them  of  the  extreme  danger  of  entering  upon  a  race  of  competition,  in  which 
those  who  engage  in  it  are  too  apt  to  overlook  what  is  essential  to  their  own  safety." 

There  is  no  joint-stock  bank  of  whose  rise  and  progress  we  have  a 
more  detailed  account  than  the  Provincial  Bank  of  Ireland.  This  account 
is  furnished  to  us  in  the  evidence  given  to  a  Committee  of  the  House  of 
Commons,  by  the  late  secretary,  Mr.  James  Marshall.  We  recommend 
the  following  quotations  to  the  especial  consideration  of  students  in  prac- 
tical banking,  as  showing  most  minutely  the  various  steps  by  which  pros- 
perity is  obtained  by  banking  institutions  :  — 

1. —  Ttie  Constitution  oftlie  Provincial  IBank  of  Ireland. 

"  Can  you  explain  to  the  committee  the  constitution  of  the  Provincial  Bank  ?  —  I 
can.  I  may  make  reference  to  the  annual  reports  of  the  institution,  of  which,  I  un- 
derstand, copies  were  furnished  to  this  committee ;  a  report  is  made  to  the  proprie- 
tors on  the  third  Thursday  of  May  in  each  year. 

"  By  whom  is  that  report  prepared  ?  —  By  a  special  committee. 

"  A  committee  of  the  board  of  directors  ?  —  A  committee  of  the  board  of  directors, 
whom  it  is  my  duty  to  attend  on  such  occasions,  and  to  be  their  organ  in  acting  as  the 
clerk  of  that  committee. 

"  When  that  sub-committee  has  prepared  the  report,  what  further  step  is  then  taken  * 
It  is  submitted  then  to  the  general  court  of  directors. 

"  Is  it  examined  by  them  ?  —  By  the  general  court ;  it  is  laid  before  them,  and  every 
part  of  it  is  explained  to  them  ;  and  they  have  it  in  their  power  to  examine  any  part, 
to  refer  instantly  to  the  books,  or  the  source  from  which  A  is  drawn.  The  committee 
in  making  it  up  go  very  minutely  to  work,  and  examine  very  particularly. 

"  Then  are  the  committee  to  understand,  that  before  the  report  is  laid  before  the 
proprietors,  that  report  is  first  submitted  to  a  select  committee,  reported  by  them  to 
the  general  court,  and  approved  of  by  the  general  court  ?  —  It  is ;  it  is,  in  the  first 
instance,  signed  by  the  chairman  of  the  committee,  when  presented  to  the  general 
court. 

"  When  laid  before  the  proprietors,  is  it  laid  before  the  proprietors  on  the  responsi- 
bility of  the  court  of  directors'?  —  Completely  so." 

"  Just  confine  yourself  at  present  to  the  constitution  of  the  bank.  '  It  may  be  here 
proper  to  state,  for  the  information  of  the  proprietors,  the  regulations  which  have  been 
adopted,  in  the  first  place,  for  conducting  business  in  a  proper  manner  at  the  branches : 
and,  secondly,  for  the  control  and  superintendence  which  are  exercised  over  them  by 
the  directors"  in  London.  First,  as  to  the  branches  ;  fpr  the  due  management  of  the 
business  at  each  a  suitable  house  has  been  obtained,  and  the  following  officers  have 
been  provided  ;  viz.  manager,  accountant,  teller,  clerk,  porter ;  all  of  whom  find  secu- 
rity for  their  fidelity.  Where  the  scale  of  business  requires  it,  the  number  of  the  in- 
ferior officers  is  increased,  but  there  are  only  two  principal  officers  at  any  branch, 
viz.  manager  and  accountant ;  and  for  securing  more  effectually  the  proper  discharge 
of  the  duties  of  all,  and  assisting  the  manager  with  advice  and  information,  there  has 
been  appointed  at  each  station  a  board  of  local  directors,  consisting,  according  to  cir- 
cumstances, of  three,  four,  or  five  gentlemen  of  the  first  respectability  in  the  place, 
EE  361 


A  Trtahte  on  Banking. 

who,  in  order  to  be  eligible,  most  themselves  have  an  inter,  -t  in  ii..-  i  .tab'.M.m.-m.  i  % 
holdtef  tea  shares  each  of  its  stock.    The  duty  of  these  •.  ;..  meet  duily  m 

a  ffiTM  boor  at  the  bank's  office,  and,  along  with  the  mm 
•rated  for  discount,  and  of  all  applicnti  <  «>  business  of 

thu  •ature  it  U  necessary  that  t««>  !•><  al  .lire,  tors  and  tin-  IIIUII»L<  r  I  .   |,i.  M  -nt  ,  mid  i: 
is  piwMed,  that  where  application^  I«T  •  Bed,  in  ii.dr.  i.lnal  • 

•.lin  fixed  amount,  or  when  tl.e  manager  ditVcr-  in  opinion  lYom  the  majoi. 
the  local  board,  the  matter  mu-t  !•<•  submitted  to  the  de<  i-ion  ot'  tin-  <  <>m  i  < 

-  further  the  duty  nt'  tin-  local  din-dors  to  compare  daily  the  row 
with  the  entries  in  the  each-book*  to  count,  at  .-tat.  d  int<  mil.-.  the  la-h  in 
the  manager,  and  to  certify  the  returns  made  periodically  from  the  IU-..IH  Ii  to  1..  : 

Aro  th«  committee  tlicn  to  understand  distinctly  tli.it  the  local  diic.-tui-.  in  the 
ca«e  in  which  the  manager,  who  is  the  head  officer  of  the  .society,  diil'ers  \\i;h  them. 
although  he  may  v.  are  bound  to  refer  those  cases  to  the  London  bu.;i 

iy  decision  is  come  to  1  —  In  every  case. 

•i  another  contingency  it  would  ap|>car,  that  where  the  pecuniary  transaction*  in 
giv 


qimtiul  vwnofaA  a  given  amount,  that  too,  although  the  In.  .ml  mi  :ht  l>e 

the  o  :-.'.•  ration  i-r  tin-  I.i.ndun  !  ..;.i,i  ,,i'  ,!.n  etonf  —  II  i- 
\\  i:.it  ti,.e-  that  -mn  iri'iuTiilly  amount  to?     Is  it  a  fixed  sum,  or  does  it  vary  a. 
cording  to  the  circumstances  of  the  different  branches  1  —  It  has  varied  according  to 
dffCMilMUCH  .  but.  generally  sjx-aking,  from  £300  to  £500  is  coii-idi  n  d  the  extent 
.:  h  nny  tiling  in  tlie  shape  of  a  credit,  other  than  the  discount  of  a  mercantile 
bill,  would  go." 

2.  —  The  Selection  of  Officers. 

"Be  so  good  as  to  explain  to  the  committee  what  steps  were  taken  by  the  Provincial 
Bank  of  Ireland  in  the  selection  of  their  various  paid  officers  at  the  branches  1  —  I  be- 
lieve that  is  detailed  in  this  said  report.  '  The.  selection  of  officers  in  particular  v.a- 
a  matter  of  paramount  importance,  both  on  arc-mint  of  the  great  Dumber  required  to 
fill  the  intended  situations  in  Ireland,  and  the  m-cc^ity  there  \va»  to  M  -rutiniw  their 
((ualificntioM  as  to  character  and  ability.  Communications  were  made  on  :!:i-  Mil.jci  -t 
with  various  gentlemen  in  diflerent  parta  of  the  country,  from  whom  it  was  expected 
UK;  best  information  could  be  obtained.  The  prospectus  of  the  society  havitiL'  set  out 
with  the  resolution  that  the  business  should  be  conducted  on  the  principles  which  had 
been  so  long  and  so  successfully  acted  upon  in  Scotland,  it  seemed  desirable  to  obtain 
from  that  country  persons  trained  up  in  banks  there,  provided  their  c|ualinYatioii*  in 
other  respects  were  such  as  to  recommend  them.  With  this  view,  the  secretary  '  (th:u 
was  not  myself  at  that  time)  'was  sent  down  to  Edinburgh  in  February  for  the  purpo-e 
of  making  inquiries;  and  notice  having  l»een  given  in  the  public  papers  that  persons 
were  wanted  to  fill  situations  in  the  projected  establishment.-  in  Ireland,  a  gentleman 
in  the  above  city  was  employed  to  receive  applications  and  to  institute  the  m-i-i  minuto 
and  scrupulous  inquiries  regarding  the  character  and  ijualilication  of  tho-e  who  should 
apply.  Another  gentlemen  from  the  same  city  %\.,  •  proceed  to  I,on- 

don.  to  assist  the  directors  in  the  formation  and  prosecution  of  a  plan  for  conducting 
the  business,  when  they  should  be  ready  to  commence  it  in  Ireland'  (that  a!!u 
myself).  4  The  extensive  correspondence  which  the  applications  and  inquiries,  pro- 
diiced  bv  the  measures  above  mentioned,  necessarily  occasioned,  occupied  the  atten- 
tion of  tile  directors  very  closely,  and  for  a  considerable  length  of  time,  and  the  rc-u!t 
has  been  that  the  services  of  a  number  of  most  valuable  officers  have  been  secured  to 
the  society.' 

"  But  at  that  period  was  there  a  greater  facility  in  procuring  the  sen-ice?  of  gentle- 
men  more  particularly  who  had  experience  in  the  Scotch  banking  than  there  would 
be  subsequently,  when  there  was  a  more  active  competition  in  the  establishment  of 
banks  ?  —  No  doubt  of  it. 

*  What  description  of  security  were  these  officers  required  to  pive  ?  —  Unexception- 
able personal  security  ;  two  persons,  at  least,  generally  were  joined  in  a  bond  for  the 
fidelity  of  the  officer. 

"  Wat  there  any  fixed  proportion  between  the  amount  of  the  security  required  and 
of  the  salary  paid,  or  the  duties  to  be  performed  ?  —  The  amount  hod  respect  to  the 
duties  to  be  performed  rather  than  to  the  salary. 

' 


The  Provincial  Bank. 

"  What  was  the  general  security  that  was  taken  by  bond  for  the  fidelity  of  these 
officers  ?  —  The  lowest  clerk  was  £  1,000 ;  the  highest  £  10,000  for  a  manager  at  the 
largest  branch. 

"  And  that  has  been  enforced  by  the  Provincial  Bank  with  respect  to  its  officers  ? 
The  amount  of  £  10,000  has  not  been  required,  as  we  have  practically  found  £  5,000 
to  be  a  more  commandable  sum  ;  I  would  say,  within  the  reach  of  the  description  of 
parties  who  are  aspirants  to  these  offices. 

"  Now  with  respect  to  the  local  directors,  how  were  they  selected  ?  —  It  is  mentioned 
here,  that  there  should  be  selected  three,  four,  or  five  gentleman  of  the  first  respecta- 
bility in  the  place,  of  commercial  knowledge,  whenever  those  could  be  obtained ;  if 
having  had  that  commercial  knowledge,  and  being  disengaged  from  business,  thev 
were  considered  as  so  much  the  more  eligible. 

"But  in  the  selection  of  local  directors,  so  far  from  excluding  persons  by  reason  of 
their  having  commercial  or  banking  knowledge,  are  the  committee  to  understand  that 
such  parties  were  preferred  ?  —  Where  they  had  it,  and  were  not  understood  to  be  in 
a  situation  to  require  banking  accommodation  for  themselves. 

"  You  have  stated  that  the  local  directors  were  required  to  take  ten  shares  each,  at 
the  least  ?  —  Yes. 

"  Will  you  have  the  goodness  to  state  what  the  reason  was  that  they  were  required 
to  take  those  shares  1  —  In  order  that  they  might  have  a  greater  interest  in  the  estab- 
lishment ;  feel  a  personal  interest.  I  must  say  we  have  not,  in  every  instance,  been 
able  to  get  gentlemen  of  that  description.  We  have,  in  some  instances,  appointed 
gentlemen  who,  from  various  causes,  declined  to  become  shareholders ;  at  least,  we 
have  elected  gentlemen  to  be  local  directors  without  requiring  the  fulfilment  of  that 
condition  :  there  are  some  instances  at  present  of  gentlemen  who  are  so ;  but  no  doubts 
regarding  the  solvency  of  the  bank  ever  deterred  any  of  them." 

3.  —  The  C/u>ice  of  Directors. 

"  Now  tell  us  how  they  are  appointed  ?  —  The  directors  in  London  were,  of  coursei 
originally  appointed  by  the  gentlemen  who  associated  together  for  the  purpose  of 
forming  this  establishment ;  and  they  continued,  with  the  approbation  of  the  meeting, 
until  a  certain  time,  when  by  the  deed  of  settlement,  which  was  afterwards  prepared, 
four  were  to  go  out  every  year. 

"  In  the  vacancy  of  the  four,  who  appoints  their  successors  1  —  The  proprietors  gen- 
erally ;  the  general  meeting  of  proprietors. 

"  Are  they  refiligible  ?  —  They  are  declared  by  the  deed  of  settlement  to  be  re- 
eligible. 

"  Are  they  recommended  to  the  court  of  proprietors  by  the  court  of  directors  ? 
They  are ;  they  have  been  virtually  so  :  and  I  beg  to  refer  to  one  of  the  annual  re- 
ports, which  gives  an  explanation  upon  that  point.  It  is  in  the  report  made  the  17th 
of  May,  1827,  in  which  it  is  stated  :  —  The  directors  have  now  to  advert  to  a  cir- 
cumstunce  of  some  importance  as  connected  with  the  constitution  of  the  society. 
By  the  deed  of  settlement,  the  number  of  directors  was  limited  to  twenty.  Since 
the  completion  of  the  deed,  that  number  has  been  reduced  by  death  or  resignations 
to  sixteen ;  and  the  directors  having  found  by  experience  that  the  latter  number  is 
quite  sufficient  to  insure  a  due  attendance  for  the  efficient  management  of  the  busi- 
ness of  the  establishment,  have  not  thought  it  necessary  to  enforce  the  terms  of  the 
deed  by  proposing  the  election  of  new  members  ;  and  they  think  themselves  now  justi- 
fied, by  past  experience,  in  unanimously  recommending  to  the  rourt  of  proprietors  to 
limit  the  number  of  directors  for  the  ensuing  year  to  sixteen.  The  directors  may  add, 
that  this  arrangement  will  be  attended  with  a  considerable  saving  of  expense  ;  and  iu 
conclusion,  they  beg  to  state  to  the  proprietors  an  opinion  in  which  they  also  unani- 
mously concur;  viz.  that  in  future  elections,  it  will  greatly  conduce  to  the  harmony 
and  cordiality  which  it  is  so  desirable  should  prevail  amongst  the  directors  themselven, 
as  well  as  to  the  good  management  of  the  bank's  affairs,  if  a  recommendation  shall  be 
made  by  them  to  the  proprietors  in  favor  of  those  candidates  whom,  after  due  inquiry, 
they  shall  find  to  be  the  best  qualified  to  fill  the  situation.' 

"  Have  those  recommendations  been  generally  complied  with  by  the  proprietors  ? 
—  Always. 

"  Uniformly,  without  exception  ?  —  Uniformly ;  it  has  uniformly  been  acquiesced  in. 
Two  or  three  candidates  had  upon  more  thnn  one  occasion  started,  but  when  the  mat- 

363 


A  TVtufu*  on  Banking. 

__  ......... 10  them,  they  hurt  uniformly  acquiesce.!  in  it.     It  is  necessary  to 

'MM,  to  pomplite  tbia,  that  the  recommendation  to  limit  the  numl>cr  of  (!,,,.•. 


WM  afterwards  the  Mhject  of  a  •pedal  provision  by  an  additional  ,i,-i  .1  ..i 
proprietor*,  therefore  the  BMnbtr  cannot  be  extended  beyond  M\U,  H  without  a!: 


-  Are  the  sUraejjori  paid  for  their  attendance  1  —  They  are. 

What  U  the  emoun:  <>f  payment  «  hi.  h  they  receive  t  —  It  U  so  regulated  that  no 
•firmer  o«n  receive  above  £  i50  •  year,  the  director  in  London  I  mean,  were 
tending  at  every  po*rible  meeting  that  he  could. 

-  Is  the  payment  an  annual  payment,  or  pn.|>ortionate  to  the  attendances  ?  —  Pro- 
portionate to  the  attendances,  ascertained  every  quart,  r. 

~  According  to  the  number  of  attendances  so  the  parties  are  paid  ?  —  Tes,  accord- 

-  Waa  that  sanctioned  by  the  proprietors  and  by  the  society  ?  —  The  deed  of  settle- 
jiiem  contain*  a  provision  allowing  the  directors  to  take  the  sum  of  £  5,000  as  re- 
muneration ;  they  have  never  taken  more  than  £  3,000;  the  proportion  is  red-. 
th»i  was  wbien  th*e  number  of  directors  was  twenty. 

^«r  Tlioma*  t'miionilr.  —  What  do  they  take"  now,  the  sixteen?  —  They  cannot 
Bteeed  XS,000."    (At  a  recent  meeting  of  the  shareholders  of  the  bank,  the  chairman 
the  amount  to  be  £  4,000.) 


4.  —  The  Daify  Committee. 

"  Will  yon  state  how  they  transact  their  business  ?  —  By  meeting  daily  in  committee, 
(sj  general  committee,)  which  i«  open  to  all  to  attend  ;  but  in  order  to  be  a  quorum, 
there  roust  be  three  present;  and  by  a  weekly  court,  held  each  Friday,  at  which  all 
ouch!  to  be  present. 

-  Is  there  a  record  in  writing  of  all  the  directions  and  the  acts  of  that  special  com- 
mittee»— There  is 

"Are  each  of  those  acts  brought  under  the  examination  and  review  of  the  general 
court  on  Friday? —  At  the  weekly  court  they  HIV,  the  minutes  are  read  over. 

1-  the  question  put  upon  the  eoutinnuiion  of  those  minutes,  or  is  it  open  to  the 
general  court  to  vary  or  ulter  tin  in  '>.  —  The  <jii.  -tion  i.  -pr. -jally  j.ut  by  the  chairman 
of  the  weeklv  court,  whether  it  is  the  plea.-ure  of  that  court  to  confirm  the  minutes  of 
the  pwt  week  which  have  been  read. 

•  Have  you  known  instances  in  the  mnnnpement  of  the  bank  in  which  there  have 
been  any  variations  upon  the  proceedings  of  the  committee  proposed  by  the  genera! 
court,  so  as  to  show  that  it  is  an  active  as  well  as  a  theoretical  superintendence  ?  —  I 
have  seen  instances  where  the  subject  has  l.e.-n  brought  under  revision,  and  which  has 
produced  an  alteration  of  the  resolution  of  the  <••>::, mitti-e. 

Having  now  explained  to  the  committee  the  formation  of  your  local  administra- 
tion at  the  branches,  and  your  general  »dmini-t union  in  London,  will  yon  state  what 
the  course  of  proceedin-  U.  to  in-ure  to  the  court  in  London  a  knowledge  of  that 
which  takes  place  at  the  different  branch'--  '  I  •  •  ."I  tVom  the  report  already  referred 
to:  '  Renlar  advices  of  the  proceedings  at  the  branches  are  transmitted  by  the  mana- 
ftn  to  London  by  post  every  second  or  third  day,  according  to  circumstances  ;  and  at 
the  end  of  each  week  a  complete  statement  of  the  whole  transactions  is  made  up,  and 
forwarded  by  the  mail-coach.  These  returns  are  fiiM  examined  by  the  officers  of  the 
London  establishment,  and  then  submitted  to  the  directors.  For  giving  the  necessary 
orders  arising  oat  of  these  communications,  for  judging  of  all  matters  n -fern •<!  to 
them  from  the  brmncbea,  for  disposing  of  the  bank's  funds  in  London  and  Dublin,  and 
for  the  discharge  of  all  other  duties  implied  in  the  exercise  of  a  superintendence  over 
the  whole  establishment,  whether  in  Ireland  or  in  London,  the  directors  hold  regular 

•    '  • :       •.    •  • .  •  •  •  1 1  _-  - 

I  re 'the  accounts  which  are  sent  from  the  branches  accounts  in  detail  of  the  whole 
of  the  operation*  of  the  bank  ?  —  They  are. 

••  Are  they,  in  met,  transcripts  of  the  accounts  of  the  bank  from  period  to  period  ?  — 
They  are  so:  with  this  explanation  regarding  the  current  accounts  of  parties  holding 
aceorats  with  the  bank,  every  particular  draft  or  receipt  is  not  sent  to  London,  or 
rather  the  entries  of  these,  I  mean,  are  not  copied  or  sent  to  London  :  but  then:  is  tin- 
cheek  on  the  operations  at  the  branches,  the  exact  balance  of  every  man's  account  at 
the  cad  of  each  week  is  given,  and  forms  part  of  an  abstract  of  the  balance 

M4 


The  Provincial  Bank. 

which  is  set  forward,  and  which  must  agree ;  therefore  if  it  were  wrong  it  would  at 
once  detect  itself. 

'•  Then  no  variation  can  take  place  in  the  actual  balance  without  the  attention  of  the 
court  being  at  once  called  to  it  ?  — None  can. 

"And  is  the  name  of  each  individual  to  whom  these  advances  are  made  from  time 
to  time  brought  under  the  special  notice  of  the  court  of  directors  in  London  ?  —  Yes  ; 
by  the  following  process.  The  branches  are  divided  amongst  the  directors,  so  manv 
allotted  to  such  a  sub-committee,  who  take  up  the  affairs  of  these  branches  each  week 
in  succession,  and  examine  all  the  bills  that  have  been  discounted,  the  advances  that 
have  been  made  of  any  description,  and  the  balance  of  each  man's  account,  whether  in 
his  favor  or  against  him." 

5.  —  The  Inspection  of  Branches. 

"  Have  you  any  system  of  inspection  by  which  you  are  enabled  from  time  to  time  to 
verify  the  correctness  of  the  proceedings  of  the  branches  ?  —  We  have  ;  besides  having 
a  half-yearly  balance-sheet  made  out  with  all  the  details  of  the  affairs  of  each  branch 
at  the  time,  and  which  is  scrupulously  examined  at  London,  there  is  an  inspector  (two 
at  present)  whose  duty  it  is  to  go  through  the  branches  and  to  examine  personally  and 
verify  every  voucher  and  every  particular,  and  to  remain  at  the  branch  until  they  are 
fully  satisfied  that  all  is  right. 

"  Who  are  these  officers  ?  —  Mr.  Murray,  the  first  manager  employed  at  Cork,  was, 
from  a  conviction  of  his  very  eminent  qualifications  for  that  office,  elected  inspector ; 
he  is  now  our  agent  in  Dublin,  and  chief  inspector  of  the  branches.  There  has  been 
united  with  him  in  duty,  first,  Mr.  Paton,  who  was  manager  at  Armagh,  and  then 
manager  at  Cork,  but  who  has  now  left  our  service,  except  that  he  has  been  elected  a 
local  director  of  the  Armagh  branch,  where  he  now  resides.  Mr.  Paton  has  been  suc- 
ceeded in  the  inspectorship  by  Mr.  Hewat,  who  is  at  present  acting  as  interim  manager 
at  Cork  branch. 

"  Are  the  visits  of  your  inspectors  at  stated  and  known  intervals,  or  is  any  branch  at 
any  one  moment  liable  to  the  visit  of  an  inspector,  and  to  an  immediate  examination 
and  verification  of  their  accounts  and  bills  and  balances  ?  —  Every  branch  is  so  liable 
to  be  visited  ;  there  is  no  previous  intimation  given,  except  the  visit  be  for  some  par- 
ticular purpose  which,  by  a  representation  from  the  branch,  calls  on  the  inspector 
to  go. 

"  As  an  additional  security,  have  yon  yourself,  or  any  of  the  directors,  been  accus- 
tomed to  visit  the  branches,  and  to  report  thereon  1  —  I  have  myself  every  year,  and 
sometimes  oftener  than  once  a  year,  even  twice  or  three  times  in  a  year,  gone  to  Ire- 
land, and  have  gone  through  the  whole  branches,  in  fact,  more  than  once,  at  different 
times ;  and  on  all  occasions  have  made  examinations  which  appeared  to  me  to  be 
necessary  ;  and  besides  that,  the  directors  have  in  person  repeatedly  visited  the 
branches  ;  deputations  of  the  London  directors,  I  mean,  have  so  done." 

6.  —  The  Declaration  of  a  Dividend. 

"  Will  you  explain  to  the  committee  what  steps  you  take  before  you  declare  a  divi- 
dend ?  —  We  have  regularly  a  balance  every  half  year ;  the  dividend  has  only  been 
declared  once  a  year,  at  the  termination  of  the  year,  which  is  in  March  ;  our  year  end'' 
in  March.  Prior  to  that  period,  each  manager  is  directed  to  send  up  a  special  report 
of  every  obligation  which  is  outstanding,  or  of  any  which  is  doubtful,  describing  par- 
ticularly in  the  report  every  party  to  such  obligation ;  that  is  preparatory  to  going  fur- 
ther into  the  matter ;  then  when  the  balance  at  the  end  of  March  is  completed,  a  com- 
plete balance  sheet  of  every  branch  is  made  up  and  sent  to  the  bank,  with  a  more  de- 
tailed report.  A  special  committee  of  the  directors  is  appointed  to  examine  those,  and 
they  go  minutely  through  them,  and  weigh  every  outstanding  debt,  and  strike  off 
every  thing  that  is  considered  to  be  irrecoverable  ;  they  then  consider  in  what  degree 
the  reports  of  the  managers  represent  every  other  outstanding  debt  to  be  recoverable, 
either  in  full  or  in  part ;  and  when  all  that  has  been  done,  they  add  generally  a  sum 
to  cover  still  any  possible  omission,  and  it  is  only  then  that  the  fair  profits  of  the  year 
are  considered  to  be  ascertained. 

"  Can  you  inform  the  committee  how  far  your  calculations,  your  annual  calculations 
of  bad  and  doubtful  debts,  have  or  have  not  been  below  or  above  the  mark  ?  —  In 
many  instances,  our  allowances  have  exceeded  what  has  turned  out  to  be  the  real  losa ; 

EE*  365 


A  Treat***  on  Banking. 

for.  M  I  mentioned  before,  the  directors,  in  order  to  be  more  lecture,  bare  been  in  the 
prmrtice  of  making  an  additional  deduction  orer  all  the  deductions  made  by  the  officers 
at  the  branch**. 

Hare  the  proprietor*  any  power  under  your  deed  of  si-til,  m,  nt  of  naming  any  au- 
ditor*, or  baring  any  examination  of  tboae  accounts,  so  as  to  verity  their  nd, -lity  ?  — 
*v«  M>  awliton,  hot  there  is  a  provision  in  the  deed  of  wtilniu-nt  \>\  \\hVh  H 
certain  number  of  peopriXon  may  call  for  a  further  investigation  of  the  accounts,  if 
•         .:      .          ,:      .        • 

7.  —  Tie  Oman  of  it»  Prosperity. 

-  Do  you  think  there  is  any  thing  peculiar  in  the  construction  of  this  hank  which  has 
{•Mired  its  being  correctly  and  well  managed  up  to  the  present  time,  or  that  it  Li, 
rather  arisen  from  the  '  happy  accident '  u[  tin-  directors  who  were  selected  having  (.<•. n 
honorable  and  correct  men  of  business  t  —  I  conceive  the  von-  first  and  indispensable 
thing  was  an  exceedingly  respectable  board  of  directors  fornu •<!  in  the  first  instnme, 
and  which  has  always  been  maintained.  In  the  next  j.lnce,  that  the  system  of  account- 
ing thai  wasadopletl,  and  the  check  on  the  operations  of  the  ditVcrent  l.ram-h.  -.  \slu.  h 
has  not  been  departed  from,  has  most  materially  contributed  to  that  good  result.  In 
the  next  place,  there  was  an  exceedingly  good  field  for  banking  when  we  eonm. 

•-land  was  very  destitute  of  good  banks  at  the  time,  the  Bank  of  Ireland  opera- 
tions having  been  confined  only  to  Dublin.     Therefore,  from  all  those  concurring  cir- 
,  I  conceive  the  prosperity  of  the  bank  has  resulted." 


To  those  causes  we  may  add  one  more,  stated  in  the  Report  delivered 
by  the  Directors  to  the  Proprietors  in  the  year  1836,  —  the  non-interfer- 
ence of  the  shareholders  in  the  distribution  of  the  profits :  — 

"  To  this  desirable  position  the  affairs  of  the  bank  have  been  conducted,  as  the  di- 
rector* bare  great  pleasure  in  acknowledging,  by  the  uniform  support  and  continued 
approbation  of  the  proprietors,  who,  far  from  manifesting  any  impatient  'I. --in-  to  par- 
ticipate in  the  reserved  profits,  have  always  relied  with  contidem  e  on  the  opinion  of 
those  by  whom  the  working  of  the  establishment  was  superintended,  feeling  assured 
that  whenever  such  participation  was  clearly  expedient,  it  would  not  be  withheld." 

The  following  is  a  copy  of  the  Balance-sheet  attached  to  the  last  Re- 
port, delivered  May  17th,  1849  :  — 

PROVINCIAL  BANK  or  IRELAND.  £       i.    d. 

The  amount  of  rest  or  undivided  profits  at  25th  March,  1848,  was  .        107,505  10  1 1 
Out  of  which  there  have  been  paid  two  half-yearly  dividends,  at  the 
rate  of  8  per  cent  per  annum,  amounting  to  43,200    0    0 

Leaving  a  balance,  or  rest,  of        ....  64,305  10  11 

To  which  there  has  sinrc  U-cn  added  the  amount  of  net  profits  for 
the  year  ending  the  31st  March  last,  after  deducting  the  Property 
Tax  and  all  expenses,  and  providing  for  all  bad  and  doubtful 

45,733     5     6 


Making  the  amount  of  rest  at  31st  March,  1849,         .    £110,03816    5 

The  Provincial  Bank  of  Ireland  has  branches  at  the  following  places  : 

Armagh.  Colcraine.  :noy.  Oinagh. 

Athlone.  Cootehill.  Galway.  Parsonstown. 

Ballina.  Cork.  Kilkenny.  Skibbcreen. 

liallynv-na  Drogheda.  Kilru-h  Sligo. 

Hallv»h*nnon.         Dnndalk.  Limerick.  ane. 

!  Dungannon.  Londonderry.  Tralee. 

Baadoa.  Dnngarvon.  ow.  ford. 

Bd&ut.  F.nni*.  Monaghan.  Wexford. 

Cavan.  .i«rorthy.  Newry.  Youghal. 

uiskilkn. 

366 


TJie  National  Bank. 

The  National  Bank  of  Ireland. 

The  Prospectus  of  this  bank,  issued  in  1834,  announced  that  it  would 
be  conducted  on  the  "  local  shareholder  principle." 

"  It  is  proposed  that  each  branch  shall  have  a  separate  capital  proportioned  to  the 
extent  of  its  business,  one  half  to  be  subscribed  by  resident  shareholders,  so  as  to  iden- 
tify their  interest  with  their  own  establishment,  and  the  other  half  to  be  subscribed  by 
the  National  Bank  of  Ireland,  whose  connection  with  each  branch,  whether  its  separate 
capital  consists  of  £5,000  or  £50.000,  will  afford  it  the  credit  of  whatever  capital 
(however  large)  the  National  Bank  of  Ireland  may  have  actually  paid  up  at  the 
time." 

"  The  following  are  the  terms  and  conditions  of  subscribing :  — 

"  1.  That  a  company  shall  be  formed  in  London,  to  extend  to  Ireland  the  benefit  of 
a  sound  banking  system. 

"  2.  That  a  bank  be  formed  in  each  town  in  Ireland,  where  practicable  by  law,  and 
which  offers  a  prospect  of  success  to  the  operations  of  the  company. 

"  3.  That  the  object  of  the  London  company  shall  be  to  connect  itself  with  share- 
holders exclusively  interested  in  the  success  of  each  local  establishment. 

"4.  That  the  principle  of  the  bank  shall  be  the  division  of  profits  of  each  bank  with 
such  local  shareholders  in  Ireland.  The  capital  of  each  branch  to  be  subscribed 
equally  by  shareholders  on  the  spot  and  the  company  in  London. 

"  5.  That  the  capital  of  the  London  company  shall  be  £  1,000,000,  in  shares  of  £  50 
each,  to  be  called  the  original  capital,  which  may  be  increased  as  the  business  of  the 
company  extends  ;  but  the  premium,  on  any  addition,  to  go  to  the  first  subscribers. 

"  6.  That  the  bank  shall  be  formed  as  soon  as  half  the  capital  is  subscribed. 

"  7.  That  the  bank  shall  be  managed  by  a  board  in  London,  consisting  of  twenty- 
four  directors,  in  whom  will  be  vested  the  supreme  control. 

"  8.  That  each  local  bank  shall  be  managed  by  a  board  of  local  directors,  elected  by 
the  shareholders,  subject  to  the  approbation  of  the  directors  in  London." 

This  principle  was  first  announced  to  the  public  by  the  late  Mr. 
Thomas  Joplin.  He  attempted  to  introduce  it  into  the  National  Provin- 
cial Bank  of  England,  of  which  he  was  the  managing  director,  and  to  the 
formation  of  which  he  had  materially  contributed.  But  the  practical  dif- 
ficulties were  found  to  be  great.  It  was  almost  impossible  to  arrange  the 
preliminaries  to  the  satisfaction  of  all  parties,  and  the  principle  was  never 
brought  into  operation.  Mr.  Lamie  Murray,  who  projected  the  National 
Bank  of  Ireland,  was  the  secretary  of  the  National  Provincial  Bank  of 
England,  and  had  adopted  Mr.  Joplin's  views  on  the  subject.  When  first 
established,  therefore,  the  National  Bank  of  Ireland  acted  on  this  princi- 
ple ;  but  after  a  few  years  the  independent  banks  in  Ireland  consented  to 
become  branches  of  the  head  establishment.  Those  at  Clonmel  and 
Oarrick-on-Suir,  however,  declined  this  arrangement,  and  they  still  regis- 
ter as  independent  banks,  though  they  are  regarded  by  the  public  as 
branches  of  the  National  Bank  of  Ireland. 

Another  peculiarity  attended  the  formation  of  this  bank.  Its  chief  con- 
nections lay  among  that  political  party  in  Ireland  who  advocated  a  Repeal 
of  the  Union,  and  who  had  been  accused  of  causing  all  the  runs  for  gold 
that  had  taken  place  on  the  existing  banks.  In  the  provisional  committee 
we  find  the  names  of  the  late  Daniel  O'Connell,  Esq.,  M.  P.,  Maurice 
O'Connell,  Esq.,  M.  P.,  Fitz-Stephen  French,  Esq.,  M.  P.,  James  Grattan, 
Esq.,  M.  P.,  and  others  of  the  same  political  views.  The  seat  of  govern- 
ment, however,  like  that  of  the  Provincial  Bank  of  Ireland,  was  fixed  in 
London.  One  advantage  resulted  from  connecting  the  heads  of  this  parly 

367 


A  Trtaiite  on  Banking. 

with  an  Irish  joint-stock  bank.  There  was  an  end  to  all  political  runs  for 
i.'»M.  \\  •  .  M  a  nin  afterwards  took  place,  in  consequenee  of  the  failure 
of  the  Agricultural  Ifcmk,  Mr.  OVonnell  used  all  his  inlluenee  to  allay  tin- 
excitement  thru  occasioned.  The  branches  of  the  National  Hank  are 
opened  almost  entirely  in  the  south  and  west  uf  Ireland.  The  l>ank 
nteo  an  office  in  hnl-hn,  where,  since  the  Act  of  1845,  it  has  issued  its 
own  notes. 

1846  slates  that  the  National  Bank  of  Ireland  had  token 
the  business  of  the  London  and  Dublin  Bunk  :  — 

•  'uring  the  Utter  part  of  the  year,  it  having  t>ccn  intimated  t<>  tin-  directors  that 
the  London  and  Dublin  Hank  were  desirous  of  dissolving  tlmt  compiiny.  n.  •-ntiatiniiN 
were  entered  into  with  the  directors,  which  terminated  in  thi-  r-t:i!>lixhnu-ni  MKVCI  -dm- 
to  to  connection*  in  the  towns  of  Dundalk,  Curricknmcross,  Wicklow,  Ke!l>.  Atliv, 
Mullingar,  and  Parsonstown,  with  every  prospect  of  advantage  to  the  hunk. 
whole  of  these  local  ilk*  are,  with  the  r\<  rp:i..n  »f  l';n  -..M-IOUH.  within  tin-  <  irdc  fumi 
which  all  banks  of  Urae,  except  the  Hank  uf  Ireland,  had  U-.-n  <-\<  Indcd.  until  t  . 
tfarriffffl  of  the  monopoly  by  the  Banking  Act  of  1845." 

Several  of  the  savings1  banks  in  Ireland  having  failed,  and  occasioned 
to  the  de|>ositors,  through  the  dishonesty  of  the  officers,  and  the  in- 
ability of  the  trustees  to  make  good  the  losses,  the.  National  Bank  ot 
land  have  recently  determined  to  discharge  some  of  the  functions  of  a 
savings1  bank.  They  receive  deposits  for  10s.,  .£1,  ,£1  10a.,«£  II. 
10*.,  or  for  any  multiple  of  10*.,  but  not  for  any  fractional  part  of  JO.v. 
When  the  sums  thus  received  amount  to  ^£f>,  the  party  ir-  is  a  regular  de- 
posit receipt  for  the  amount.  In  the  mean  time  he  receives  interest  at  the 
same  rate  which  is  allowed  on  other  deposit  re<-ei|i«s  (at  present  2  [><  i 
cent)  and  can  withdraw  it  at  a  short  notice.  The  following  is  the  form 
of  receipt  given  to  the  savings1  bank  depositor  :  — 

NATIOXAL  HANK.  OF  IKEIASD. 
A5>. 

Received  from 
•f 

TEX  SHILLINGS. 

dayof  18 

_  Manager. 


The  following  is  a  copy  of  the  Balance-sheet  attached  to  the  last  An- 
nual Report,  delivered  May  23d,  1849  :  — 

£       •    <l 

Tfce  mdirkfed  profits  at  December,  1847,  were          .        .        .        r.i.i.  :,     >    4 
Net  profits  for  the  year  ending  December,  1848      .        .        .  MAW  12  10 

£87,595  17     2 
Deduct  half  year's  dividend  to  Midsummer,  1848, 

at  5  percent.     .......     £11.250    0    0 

Ditto,  to  Christmas,  1848         ....  11250    0    0 

Boe«s  of  10*.  per  share  on  30,000  shares      .        .        10,000    0    0 
Amount  paid  T.  Laroie  Murray,  Esq.,  according 

to  the  provision*  of  th«  Deed  of  Settlement      .         1,000    0    0 
Balance  of  profit  and  loss  carried  to  tlmt  account 

far  1849,    ........         3,990  12  10 

-  --  37,490  12  10 


of  undivided  profits  to  the  credit  of  reserve  fund, 
ai  Drrrmber,  1848   .........  £50,105    4     4 

MS 


The  Hibernian  Bank. 

The  National  Bank  of  Ireland  has  branches  at  the  following  places  :  — 

Athlone  Cork.  Limerick.  Roscommon. 

Athy.  Dundalk.  Longford.  Roscrea. 

Ballina.  Dungarvan.  Loughrea.  Skibbereen. 

Ballinasloe.  Ennis.  Mallow.  Tallow. 

Boyle.  Enniscorthy.  Midleton.  Thurles. 

Carrickmacross.  Fermoy.     "  Mitchelstown.  Tippcrary. 

Carrick-on-Suir.  Galway.  Moate.  Tralee. 

Cashei.  Kanturk.  Mullingar.  Tuara. 

Castlerea.  Kells.  Nenagh.  Waterford. 

Charleville.  Kilkenny.  New  Ross.  Westport. 

Clonakilty.  Killarney.  Parsonstown.  Wexford. 

Clonmel.  Kilrush.  Rathkeale.  Wicklow. 

Tlie  Hibernian  Bank. 

The  Hibernian  Joint-stock  Bank  was  formed  in  the  year  1824.  The 
following  account  of  the  origin  of  this  bank  is  given  by  John  Robinson 
Pirn,  Esq.,  of  Dublin  :  — 

"  A  number  of  Roman  Catholic  gentlemen,  finding  they  were  continued  to  be  ex- 
cluded from  the  direction  of  the  Bank  of  Ireland,  met  together,  and  obtained  the  sig- 
natures, not  only  of  Roman  Catholics,  but  of  a  number  of  others,  amongst  the  rest 
myself,  to  the  establishment  of  this  bank ;  many  merchants  signed  it,  as  considering 
that  by  having  an  opposition  bank  in  such  a  city  as  Dublin,  advantages  would  fre- 
quently be  derived  from  it,  and  not  altogether  looking  to  the  emolument  which  they 
should  receive  as  subscribers  to  the  bank,  but  looking  at  it  as  citizens  generally;  I 
myself  never  calculated  on  a  very  great  deal  of  profit  from  it,  except  at  a  very  remote 
period.  Some  of  the  individuals  who  undertook  it  came  over  to  London,  and  they 
had  expected  to  obtain  the  power  of  issuing  notes,  but  they  met  with  so  much  opposi- 
tion from  the  Bank  of  Ireland,  — there  were  some  of  the  directors  of  the  Bank  of  Ire- 
land came  over  here  in  order  to  oppose  it, — and  the  clauses  which  they  intended  to 
enable  them  to  issue  notes  were  expunged  in  the  committee ;  but  I  state  this  only  from 
hearsay." 

Its  nominal  capital  is  £  1,000,000,  divided  into  10,000  shares  of  .£100 
each.  £  25  per  cent,  has  been  paid  upon  each  share,  so  that  the  money 
actually  advanced  amounts  to  £  250,000. 

In  the  same  year  this  company  obtained  an  Act,  entitled  "  An  Act  to 
enable  the  Hibernian  Joint-stock  Company,  for  the  purpose  of  purchas- 
ing and  selling  annuities,  and  all  public  and  other  securities,  real  and  per- 
sonal, in  Ireland,  and  to  advance  money  and  make  loans  thereof,  on  the 
cecurity  of  such  real  and  personal  security,  at  legal  interest,  and  on  the 
security  of  merchandise  and  manufactured  goods,  to  sue  and  be  sued  in 
the  name  of  the  governor  or  secretary  for  the  time  being."  * 

The  preamble  slates,  that,  — 

"  Whereas  the  commerce,  and  manufactures,  and  agriculture  of  Ireland  has  long  la- 
bored under  great  disadvantage,  arising  from  the  want  of  due  command  of  capital ; 
and  that  merchants  and  manufacturers  have  no  means  of  procuring  temporary  advan- 
ces of  money  on  a  deposit  of  their  goods,  when  a  slackness  of  demand  arises ;  and 
whereas  several  persons  have  agreed  to  form  themselves  into  a  company,  or  partner- 
ship, under  the  name  of  the '  Hibernian  Joint-Stock  Company,'  and  have  subscribed 
or  raised  considerable  sums  of  money  in  order  to  purchase  and  sell  annuities  and  all 
public  and  other  securities,  real  and  personal,  in  Ireland  ;  or  to  make  loans  and  ad- 
vances of  money  on  the  security  thereof,  and  on  the  security  of  merchandise  and 

*  Anno  quinto  Georgii  IV.  Regis,  cap.  159 
369 


A   Treatise  on  Banking. 

good*,  at  lecal  intercut,  an.l  t<>  r. , .  i\  o  lodgments  of  money  or  dcponit 
r»of:  and  prat  i>uWic  KrncrU  is  expected  to  !«•  <l< -fixed  to  the  tni.l.-.  ni'aiiut .'  nu<  - 
and  afriealrare  of  Ireland  from  the  formation  of  Mich  a  company  or  jmnni  i>hi|>;  and 
where**  di«mlti«  may  arise  Iron  time  to  time,"  Ac. 

It  is  enacted,  that  this coropany  may  sue  nn<l  In- MH-I!  in  the  nnme  of  their 
governor  Of  secretary.   A  memorial  of  the  names  of  the  governor.  - 
and  members,  and  of  the  transfer  of  shares,  to  be  enrolled  in  ( 'Inn. 
and  no  actions  to  be  brought  by  tin-  company,  under  th«>  million 

i  memorial  shall  have  been  enrolled.  Kxecution  upon  aii\ 
judgment  against  the  governor  or  secretary  may  be  issued  against  any  of 
the  members,  who  are  to  be  reimbursed  their  expenses  by  tin-  company. 

At  the  last  half-yearly  meeting  of  the  slum-holders,  held  on  the,  4lh 
of  December,  1848,  the  following  statement  was  exhibited,  and  a  dividend 
declared  at  the  rate  of  5  per  cent :  — 

Abttroet  of  At  Affair*  of  the  Company  to  1*  of  November,  1848,  purwant  to  the  Deed  of 

Settlement. 

£       i.    d. 

Aneti  of  the  company 550,575    1      6 

1>M  to  the  public 218,623    7      8 

331,951  13    10 
Capital  of  the  company,  £1,000,000,  25  percent,  paid      .        .        .    250,000   0     0 

Balance  to  credit  of  profit  and  loss  in  favor  of  the  company  .        .          81,951  13    10 

Net  profits  of  the  company  for  the  year  ending  the  1st  of  November 
last,  after  deducting  all  charges  fo'r  management     ....  £16,05515     7 

The  Royal  Bank  of  Ireland. 

The  Royal  Bank  of  Ireland  was  formed  in  the  year  1836,  and  before 
opening  made  arrangements  for  taking  the  business  of  the  private  bank  of 
Sir  James  Shaw  &  Co.  At  that  time  the  law  did  not  pormit  joint-stock 
banks,  in  Dublin,  to  accept  bills  drawn  at  less  than  six  months  after 
date,  or  to  sue  and  be  sued  in  the  name  of  their  public  officers.  These 
restrictions  were  removed  by  the  Act  of  1845.  The  Royal  Bank  attempt- 
ed also  at  that  time  to  obtain  the  power  of  issuing  notes,  but  were  not 
successful.  The  manager  of  the  bank  from  its  commencement  has  been 
Mr.  Charles  Copland,  who  had  previously  been  a  manager  in  the  Provin- 
cial Bank  of  Ireland. 

At  the  last  annual  meeting,  held  on  the  7th  November,  1848,  the 
following  statement  was  laid  before  the  shareholders  :  — 

£..       $.    d. 

The  paid-up  capital  of  the  bank  is 209,175    0     0 

The  amount  of  reserve  fund 45,475    8      0 

TTie  net  profits  of  the  year,  which  terminated  on  the  31st  of  August  last, 
after  deducting  all  expenses  of  management,  amount  to  .  .  19,87716  4 

O«t  of  which  have  been  paid  to  the  proprietors  two  half-yearly  divi- 
dends, at  the  rate  of  5  per  cent,  per  annum,  amounting  to  .  10,458  15  0 

Leaving  a  Mrptw  on  the  year  of £9,419    1      4 

WWrfc  has  been  added  to  the  bad  and  doubtful  debt  fund. 

370 


The  Banks  of  Belfast. 


THE  BANKS  OF  BELFAST. 

There  are  three  joint-stock  banks  at  Belfast.  The  Northern  Banking 
Company  was  formed  in  1825,  on  a  private  bank  which  was  called  the 
Northern  Bank.  This  was  the  first  joint-stock  bank  in  actual  operation  in 
Ireland.  The  Belfast  Banking  Company  was  formed  on  a  private  bank, 
which  was  called  the  Belfast  Bank.  The  "senior  partner  in  this  bank, 
John  Holmes  Houston,  Esq.,  was  examined  as  a  witness  before  the  Par- 
liamentary Committee  of  1826,  on  the  abolition  of  small  notes  in  Ireland. 
His  evidence  contains  some  interesting  particulars  respecting  the  state  of 
banking  in  Belfast  during  the  time  he  had  been  a  partner  in  that  bank.* 
The  Ulster  Banking  Company  is  a  new  bank,  formed  in  1837.  All  these 
banks  have  branches  extending  throughout  the  north  of  Ireland.  The 
prudence  with  which  banking  institutions  have  at  all  times  been  managed 
at  Belfast,  has  no  doubt  greatly  contributed,  with  other  causes,  to  the 
prosperity  of  the  north  of  Ireland.  The  following  is  the  condition  of  the 
three  banks  at  Belfast :  — 


Belfast     Date  of      Number 
Banks.      Bank,      of  Shares.    J=  -c 


. 

3 

5 


Paid  up  on 
Share. 


Paid-up     .E  8 
Capital.    «  S 


Northern     1825        5,000 


Belfast 
Ulster 


1827 
1837 


£  s. 

£    r  First  25  0  ]        £ 
193   100  I  BonusjH)  I  iwfm    1Q 

30  OJ 


5,000  656  100 
75,000  440  10 


25  0   125,000   8 
2  10   187,500   5 


e  s 

3   9 

fcw 


11 


18 

15 


Fixed  Circu- 
lation. 


£ 
243,440 

281,611 
311,079 


The    Northern  Banking    Company  has  branches  in   the    following 
places  :  — 


Armagh. 
Ballymena. 
Carrickfergus. 
Clones. 


Coleraine. 
Downpatrick. 
Lisburn. 
Londonderry. 


Lnrgan. 

Magherafelt. 

Newtownlimavady. 


The  Belfast  Banking  Company  has  branches  at  the   following  plu 
ces  :  — 


Armagh. 

Ballymena. 

Ballymoney. 

Castleblayney 

Coleraine. 

Cooks  town. 


Dungannon. 

Larne. 

Letterkenny. 

Londonderry. 

Magherafelt. 

Monaghan. 


Newry. 

Newtownards. 

Newtownlimavady. 

Portadown. 

Strabane. 

Tenderagee. 


*  See  the  History  of  Banking  in  Ireland,  by  J.  W.  Gilbart 
371 


A  Treatise  on  Banking. 

The  Ulster  Banking  Company  has  branches  at  the  following  pla> 

Antrim.  Cookstown.  I.urgun. 

Armagh.  Coolelnl!  M-nia-hnn. 

l;  i.    t        >  Downpatrick.  <  Mnagh. 

Battrmooey.  Knni-kilien.  r<.n.ido\ui. 

I;.V,'I,L.  I/ii.dondcrry. 

The  Tipprrary  Joint-stock  Bank. 

In  the  Art  of  1845  there  is  an  express  provision  with  rrfen.-nco   .-  m.: 
Tippcrary  Bank. 

COM  of  Detrrminaliim  of  existing  Ayrrrmrni  Ivtvrrn  the  Dat>k  of  7r  JfrW  <in<l 
I'l/ifitrary  Jvint-sitx-k  llank. 


\\\\     \-   1  •••  '  '  :••  ••:-  a  c.  rtain  ji  .iiit- lock  baiikinu  <  't>inpany.ca 
'The  Tipperanr  Joint-^to.-k  15:ink,'  n  t'raincd  tVom  »\\\\  bank  i.otrs.  und-T 

a  certain  agreement  with  the  Governor  and  Company  of  the  Bank  of  Ireland  for  the 
•MM  of  the  bank  notes  of  the  said  governor  and  company,  which  agreement  is  deter- 
minahle  by  either  partv  upon  certain  notice  to  the  oiher  party,  and  it  is  just  that  in  case 
§neh  ajrreement  should  at  any  time  hereafter  during  the  continuance  of  this  Act  be 
determined  and  put  an  end  to  by  the  Governor  and  Company  of  the  Bank  of  Ireland, 


the  said  Tippcrary  Joint-stock  Bunk  should  receive  "by  way  of  compensation 
composition  as  hereafter  mentioned;  be  it  therefore  enacted,  That  if  the  raid 
•giceuicnt  shall  be  at  any  time  hereafter  during  the  continuance  1.1  r!,i-  A<t  determim  d 
or  put  an  end  to  by  the  Governor  and  Company  of  the  Bank  of  In •hn.d,  tin  n  and  in 
sura  case  the  said  governor  and  company  shall,  from  the  termination  of  the  MI  id 
agreement,  pay  and  allow  to  the  said  Tipperary  Joint-stock  Bank,  so  lunp  as  the  lat- 
ter shall  continue  to  carry  on  the  business  of  a  hank  and  to  bane  fcxclusivcly  the 
notes  of  the  Governor  ana  Company  of  the  Bank  of  Ireland,  a  con)|-oMtj())l  nt  and 
after  the  rate  of  one  per  centum  per  annum  on  the  average  annual  amount  of  the  Bunk 
of  Ireland  notes  issued  by  the  said  Tipperary  Joint- stork  Bunk,  and  kept  in  circula- 
tion, such  average  annual  amount  to  l>e  ascertained  by  the  Bank  of  Ireland  in  the 
manner  provided  for  rejrulatintf  the  compensation  to  l>c  made  to  certain  hankers  by 
the  Bank  of  England  in  and  by  the  Act  parsed  in  the  seventh  and  eighth  years  of 
the  reign  of  her  present  Majesty,  entitled  '  An  Act  to  regulate  the  Issue  of  Bank 
Notes,  and  for  giving  to  the  Governor  and  Company  of  the  Bank  of  England  certain 
Privileges  for  a  limited  Period:'  Provided  always,  that  the  total  sum  payable  to  the 
Tipperary  Joint-stock  Bank  by  way  of  composition  as  aforesaid  in  any  one  year  shall 
not  exceed  1  per  cent,  on  an  amount  that  hath  been  agreed  on  by  and  between  the 
Bank  of  Ireland  and  the  Tipperary  Joint-stock  Bank,  and  certified  by  both  banks  to 
the  Commissioners  of  Stamps  and  Taxes ;  and  such  composition  shall  cease  to  be 
payable  from  and  after  the  1st  day  of  January,  one  thousand  eight  hundred  and  fifty- 
six." 

The  Tipperary  Bank  has  branches  at  the  following  places :  — 

Athr.  Nenagh.  Thurles. 

Carfow.  Koscrea.  Tippcrary. 

Carrick-on-Suir.  Thomastown. 

At  the  last  general  meeting  the  directors  declared  a  dividend  at  the  rate 
of  6  per  cent.,  and  added  .£2,513  8s.  5d.  to  the  "  doubtful  debt  fund," 
which  then  amounted  to  .£5,013  8*.  5J.  The  amount  of  the  capital  was 
not  stated. 

The  following  joint-stock  banks  have  ceased  to  exist  in  Ireland  :  — 

1.  The  Agricultural  and  Commercial  Bank  of  Ireland,  fonn<-<l  in  th« 
year  1834,  stopped  payment  in  the  latter  end  of  the  year  1836.  It  was 
afterwards  resumed  for  a  short  time,  and  then  finally  closed.  A  full  ac- 
count of  the  reckless  proceedings  of  this  bank  is  given  in  the  third  volume 
of  the  Banker?  Magazine. 

372 


Currency  in  Ireland. 

2.  The  London  and  Dublin  Bank  was  formed  in  1844,  and  merged  in 
the  National  Bank  of  Ireland  in  the  year  1848.     This  was  not  a  bank 
of  issue. 

3.  The  Southern  Bank  of  Ireland  was  formed  at  Cork  after  the  failure 
of  the  Agricultural  Bank  of  Ireland.      It   was  registered  the  25th  of 
March,  1837,  opened  in  Cork  in  the  month  of  July,  and  stopped  payment 
in  the  following  September. 

The  Laws  of  the  Currency  in  Ireland. 

From  what  we  have  already  said  of  the  laws  of  the  currency,*  those  of 
our  readers  who  are  acquainted  with  Ireland  will  be  able  to  judge  before- 
hand of  the  revolutions  of  her  circulation.  Being  purely  an  agricultural 
country,  the  lowest  points  will  of  course  be  in  August  or  September, 
immediately  before  the  harvest,  and  the  commencement  of  the  cattle  and 
bacon  trade.  Then  it  rises  rapidly,  till  it  reaches  its  highest  point  in  Jan- 
uary, and  then  gradually  declines.  As  an  agricultural  country,  we 
should  naturally  expect  that  during  the  season  of  increase  the  circulation 
would  expand  most  in  the  rural  districts ;  and  so  we  find  that  the  circu- 
lation of  the  Bank  of  Ireland,  m  Dublin,  expands  very  moderately,  —  that 
of  her  branches,  which  are  located  chiefly  in  large  towns,  expands  more, 
—  while  the  circulation  of  the  joint-stock  banks,  which  are  located  in 
the  agricultural  districts,  receives  the  largest  increase.  Again,  the  pur- 
chases and  sales  of  agricultural  produce  are  known  to  be  in  small 
amounts ;  and  hence  the  notes  of  the  smallest  denomination  receive  the 
largest  relative  increase.  The  annual  changes  of  the  Irish  circulation  are 
governed  chiefly  by  the  produce  of  the  harvest  and  the  prices  of  agricul- 
tural products.  These  are  the  laws  of  the  circulation  of  Ireland. 

On  this  subject  I  may  quote  my  own  evidence  before  the  Committee  on 
Banks  of  Issue  :  — 

"  I  have  told  the  committee  that  I  was  formerly  manager  of  a  joint- 
stock  bank  of  issue  in  Ireland,  and  I  have  attempted  to  discover  the  laws 
which  regulate  the  circulation  of  that  country,  by  ascertaining  the  high- 
est and  lowest  amount  of  the  circulation  in  each  year.  This  which  I 
have  in  my  hand  is  a  table  showing  the  circulation  of  the  Bank  of  Ire- 
land (including  branches),  the  separate  circulation  of  the  branches  alone, 
and  the  circulation  of  the  Irish  joint-stock  and  private  banks,  on  the  last 
Saturday  of  April,  August,  and  December  of  the  years  1834  to  1839. 
It  will  be  observed  that  those  periods  are  the  same  as  those  which  I  have 
referred  to  in  the  circulation  of  the  English  country  banks.  The  law  of 
circulation  appears  to  be  different,  but  they  agree  pretty  nearly  in  this, 
that  the  lowest  point  is  the  latter  end  of  August ;  but  the  highest  point  in 
Ireland  is  generally  the  end  of  December  or  the  beginning  of  January, 
and  from  December,  or  the  beginning  of  January,  it  declines ;  so  that  the 
country  circulation  of  England  is  advancing  eight  months  and  declining 
four ;  but  the  circulation  of  Ireland  is  advancing  four  months  and  declining 
eight. 

is  this  table  compiled  ?  —  From  Appendix  Nos.  32  and  33. 

*  See  pages  240,  292,  327. 
FP  373 


A  Treatise  on  Banking. 


This  table  shows  tlmt  the  rirriilatioi)  of  I)ul>lin  docs  not  vary  much 
it  show*  that  the  circulation  of  tin-  l>nui.  lies  of  the  Hunk  of  In  l.iinl  \ 
more;  and  that  the  circulation  of  the  joint-stock  and  private  bunks  in  In- 
land varies  considerably  more. 


A  TABLC  •Aowwy  fJU  CIUCDLATIOM  </  thr  BAKK  OF  IRKLAND 
(At  CTrrafcf  ion  tf  0*  lirmdkt  alo*t;  an<t  th*  <'imil,iiwn  nf  thr  Irish  ./.„„/>,'.. 
/ViMfc  ffadb;  on  0*  la*  Saturday  of  .I/W,  Adjust,  and  December,  of  the  yeart  1834 

«•  ISM. 

7.  —  Bank  of  Irftand  and  Branclitt. 

1894.  1835.  ISM.  1838.  1839. 

££££££ 

April.     .     .3,923^00      3,798,500      3,614,100       3.332.300       3.398,400       3,536,400 
August,      .    3.453,800      3,198,700       3,133,300       2.921.600       3,059,800       2,9.-' 
December,    .  3,926,800       3,574,200       3,481,100      3,265,700       3,474,500       3,192,200 

If.  —  /tranches  of  the  Sank  of  Ireland. 

April,.    .1  C       — 

Angmt,      >  No  separate  account  kept  at  thu  time.  <  1  .056.200 

i).  mbm,  )  (i, 


///.  —  Joint-Stock  and  Private  Bank*. 

April,.     .     .1,186.165       1,517,648       2.08.1.4.11        1' 
Anmwt,       .     1,140,654       l.L>f,-|.r,7:i       l.'J^8.900       1,4>"  JIM 
Deeerobcr,    .  1,666,269       1,959,542       1,787,586       2,204,286 


1.357,600  1.572.000 
l.L'.-.T.r.nii  1.-' 1 1,900 
1,695,600  1,464,000 


2.366,774       2..')^ 
1.881,906       l.'.^.'.li'.' 
2,972,034       2,629,205 


**  It  will  be  observed,  that  in  the  year  1836,  with  regard  to  the  joint- 
stock  banks,  there  was  a  departure  from  the  law,  which  usually  increases 
the  Irish  circulation  very  rapidly  between  the  months  of  August  and  De- 
cember; for  in  1836  the  Agricultural  and  Commercial  Bank  of  Ireland 
stopped  payment ;  that  brought  on  a  run  for  gold  upon  the  other  banks, 
and  thus  the  circulation  of  those  banks  became  reduced.  This  is  the 
only  year  in  which  there  is  not  a  very  considerable  increase  in  the  circu- 
lation of  the  joint-stock  banks  of  Ireland  between  August  and  December. 

"  To  what  do  you  attribute  this  uniform  increase  of  the  Irish  circula- 
tion towards  December?  —  I  attribute  it  to  the  trade  in  corn,  and  bacon, 
and  cattle,  which  commences  in  the  months  of  September  and  October  in 
every  year;  the  produce  of  the  harvest  commences  to  be  brought  to 
market  in  September ;  but  the  bacon  is  made  in  the  beginning  of  Octo- 
ber. The  bacon  must  be  made  in  cold  weather,  and  therefore  pigs  are 
reared  so  as  to  be  fit  for  killing  by  the  1st  of  October ;  and  in  the  begin- 
ning of  October  the  provision  merchants  send  out  their  men  to  pure: 
pip  at  the  different  markets,  and  they  get  notes  from  the  hank.  The 
cattle  trade  is  conducted  in  the  same  way ;  men  go  to  the  market  to  buy 
pig»  and  cattle,  and  take  them  over  to  Bristol  and  Liverpool,  but  chiefly  to 
Bristol,  from  the  part  where  I  was.  Those  notes  are  chiefly  issued  in 
three  ways.  During  the  summer,  the  merchants,  having  their  capital  un- 
••mployed,  lodged  it  as  deposits  in  the  bank ;  then,  when  the  season  for 
trade  commenced,  they  drew  out  their  deposits,  in  the  form  of  n- 

'wards,  they  brought  us  bills  upon  their  factors  in  London,  and  our 
notes  were  issued  in  discounting  those  bills  which  thev  hud  drawn  against 


Currency  in  Ireland. 

the  exportation  of  bacon  and  cattle.  The  dealers  took  their  pigs  and 
cattle  over  to  Bristol,  and  sold  them  in  the  various  markets  and  fairs  in 
the  west  of  England,  and  received  the  notes  which  were  circulating  in 
that  district,  and  took  them  to  Mr.  Stuckey,  and  got  a  letter  of  credit  upon 
me,  payable  on  demand,  for  the  amount.  So  that  our  notes  were  issued, 
in  the  first  place,  by  the  withdrawal  of  deposits;  secondly,  for  the  dis- 
counting of  bills  on  London,  drawn  against  the  exports  which  were  made ; 
and  thirdly,  for  the  payment  of  letters  of  credit  which  had  been  obtained 
by  the  parties  who  had  sold  Irish  cattle  in  the  English  markets.  The 
notes  were,  therefore,  drawn  out  by  the  trade  of  the  country,  and  of 
course  it  was  not  in  our  power  to  withhold  issuing  those  notes,  unless  we 
wished  to  cramp  the  trade  of  the  country." 

Robert  Murray,  Esq.,  the  chief  officer  of  the  Provincial  Bank  of  Ire- 
land, was  examined  as  to  the  establishment  of  one  Bank  of  Issue  through- 
out Ireland.  The  following  is  his  reply  :  — 

"  It  would  produce  an  entire  revolution  in  the  monetary  affairs  of  Ireland.  The 
committee  will  already  have  gathered  from  the  questions  I  have  previously  answered, 
that  the  produce  is  brought  to  market  in  very  small  quantities,  and  by  a  very  large  num- 
ber, I  had  almost  said  an  innumerable  class,  of  farmers  ;  each  man  brings 'his  sack  of 
oats  and  two  or  three  pigs  to  market.  It  would  be  almost  impossible,  in  such  a  state 
of  things,  to  regulate  by  one  bank  of  issue  the  monetary  affairs  of  Ireland,  or  to  adapt 
it  to  its  purposes  as  it  is  now  situated." 

The  following  is  the  report  of  the  Select  Committee  of  the  House  of 
Commons,  made  in  1826,  respecting  the  abolition  in  Ireland  of  notea 
under  £  5  :  — 

"  With  respect  to  the  circulation  of  Ireland,  the  inquiries  of  your  committee  have 
been  less  extensive  than  those  which  they  have  instituted  with  respect  to  Scotland. 

"  The  first  law  in  Ireland  which  restrained  the  negotiation  of  promissory  notes,  was 
an  Act  passed  in  the  Irish  Parliament  in  the  year  1799. 

"  The  preamble  recites,  that  various  notes,  bills  of  exchange,  and  drafts  for  money, 
have  been  for  some  time  past  circulated  in  lieu  of  cash,  to  the  great  prejudice  of  trade 
and  public  credit ;  and  that  many  of  such  notes  are  made  payable  under  certain  terms, 
with  which  the  poorer  classes  of  manufacturers  and  others  cannot  comply,  unless  by 
submitting  to  great  extortion  and  abuse.  It  adds,  that  the  issue  of  such  notes  has 
very  much  tended  to  increase  the  pernicious  crime  of  forgery;  and  the  Act  proceeds 
to  apply  to  notes  between  the  value  of  .£  5  and  20s.  similar  restrictions  to  those  which 
had  been  applied  to  such  notes  issued  in  England  by  the  Act  which  passed  in  the  vear 
1777.  It  permits,  however,  during  the  suspension  of  cash  payments  by  the  Bank  of 
Ireland,  the  issue  of  bank-post  bills,  bills  of  exchange,  and  drafts  under  certain  regu- 
lations, for  any  sums  not  less  than  three  guineas.  This  Act  did  not  extend  to  the 
Bank  of  Ireland. 

"  In  1805,  this  and  some  other  Acts  which  had  passed  in  the  interim,  relating  to  the 
issue  of  small  notes,  were  repealed ;  and  notes  under  20s.,  which  had  been  previously 
admitted  under  certain  regulations  by  the  Act  of  1799,  were  declared  void. 

"  There  is  at  present  no  law  in  force  imposing  any  limitation  to  the  period  for 
which  notes  for  a  sum  not  less  than  20s.  may  be  issued  in  Ireland. 

"  A  tolerably  correct  estimate  of  the  amount  of  promissory  notes,  above  and  below 
£  5,  circulating  in  Ireland,  may  be  formed  from  the  subjoined  returns  made  by  the 
Bank  of  Ireland,  and  by  other  banks  at  present  established  in  that  country. 

"  Bank  of  Ireland  notes.  —  An  account  of  the  average  amount  of  the  Bank  of  Ire- 
land notes  of  £5  and  upwards  (including  bank-post  bills)  for  the  years  1820,  1821, 
1822,  1823,  1824,  and  1825:  — 

375 


A  TVeoftM  on  Banking. 

IrUh  Currwner. 

£         •.    d. 
•  Notoi  aad  port  bills  of  £  5  and  upward.,         .         .         .    3,646,660  19    6 

"  An  account  of  the  average  amount  of  the  Hank  of  Ireland  note*  under  the  value 
of  £ft  (udading  bank-post  bill*)  i.-r  the  yean  1820,  18-M,  18-J2,  1823,  1824,  and 
IMS:  — 

IrUh  Currency. 

L          ••    a. 
"  ltel«t.Mdpo»t  bills  nnder  the  value  of  £5,     .        .         .     1,643,828    0    5 

u  It  appear*  from  the  evidence  that  a  practice  prevails  in  Ireland  of  i--uin_-  note-  l"..r 
the  payment  of  snnit  between  one  and  two  pound.*,  for  throe  guineas,  und  other  I'i  .'.<•- 
tiooal  MUM> 

u  Toor  committee  M6  BO  public  advantage  arising  out  of  this  practice  :  and  they  arc 

it  tends  to  disj>e.n.se  with  the  silver  coin, 


of  opinion  that  it  ought  to  be  discontinued,  as 
and  practically  to  exclude  it  from  circulation. 
"  loor  committee  hesitate,  in  the  present  i 


imperfect  state  of  their  information,  to 

pronounce  a  decisive  opinion  upon  the  general  measures  which  it  may  be  fitting  to 
adopt  with  respect  to  the  paper  currency  of  In-hind. 

*  Although  they  are  inclined  to  think  that  it  would  not  be  advisable  to  take  any  im- 
•MditjM  Mep  for  the  purpose  of  preventing  the  issue  of  small  notes  in  Ireland,  their 
impression  undoubtedly  i«,  that  a  metallic  currency  ought  ultimately  to  be  the  basis  of 
illation  in  that  "country. 

"  It  will  probably  be  deemed  advisable  to  fix  a  definite,  though  not  an  early  period, 
at  which  the  circulation  in  Ireland  of  all  notes  below  £5  shall  cease ;  and  ir  is  deserv- 
ing of  consideration,  whether  measures  might  not  be  adopted  in  tin-  interim,  for  the 
porpos*  of  insuring  such  a  final  result  by  gradual  though  cautious  advances  to- 
wards it." 

The  following  is  a  summary  of  the  evidence  given  before  the  Commit- 
tees of  the  two  Houses  of  Parliament  as  to  the  effect  of  abolishing  the 
small  note  circulation  in  Ireland  :  — 

1.  Small  currency  is  necessary  to  carry  on  the  commercial  transac- 
tions  of  the  country. 

JOHH  ACHSSON  SMYTH,  Esq.,  Agent  for  Uie  Belfast  Bank  at  Londonderry. 

"  In  Lancashire,  I  believe  all  the  raw  materials  are  bought  in  large  parrels,  and  by 
bills.    In  Ireland,  the  raw  material  is  all  bought  in  small  parcels,  and  all  in  small 
In  Lancashire,  there  is  only  cash  wanted  to  pay  the  workmen ;  hut  we  wnnt  it 


both  to  par  the  workmen  and  to  buy  the  raw  material.  The  provision  and  grain  that 
we  send  to  England  are  also  bought  in  small  notes,  and  we  ore  reimbursed  by  drawing 
billi  for  oar  shipments."  (Common*1  Report,  p.  77 .) 

PIERCE  MAHOXT,  Esq  ,  Solicitor  to  the  Provincial  Bank  of  Ireland. 

*  If  the  banks  were  prevented  issuing  notes  under  the  amount  of  £  5,  would  any  in- 
conveniences arise  in  conducting  the  trade  of  the  South  of  Ireland  ?  —  The  trade  of 
Ireland  generally,  and  especially  in  the  South  of  Ireland,  would  be  greatly  inconvc- 
nenced,  aad  the  growth  of  manufactures  would  be  decidedly  checked,  if  not  destroyed, 
by  Men  a  measure.  From  the  great  subdivision  of  Innd  in  Ireland,  and  particularly 
in  the  Sooth  and  West  (where  the  population  is  almost  exclusively  agricultural),  the 
produce  m  disposed  of  in  small  portions,  scarcely  ever  representing  £,  5,  and  almost 
•aivertelly  under  that  amount.  I  am  of  opinion,  that  the  withdrawal  of  all  notes  under 
that  amount  would  have  the  effect  of  curtailing  the  accommodation  the  Imnks  now  af- 
ford to  the  public,  to  a  ruinous  extent ;  and  that  the  trade  of  the  country  under  such  cir- 
eusMMMM  would  not  afford  profitable  employment  for  banking  capital  to  any  extent ; 
and,  therefore,  I  should  anticipate  the  withdrawal  of  such  establishments,  except  per- 
haps at  Cork  and  Belfiut  In  the  South  and  West  of  Ireland,  from  the  nature  of  the 

376 


Currency  in  Ireland. 

provision  and  corn  trade,  the  chief  demand  for  notes  or  for  gold  commences  in  Octo- 
ber, and  continues  until  March,  when  that  trade  is  nearly  over  for  the  season.  From 
March  until  October  the  butter  trade  is  almost  the  only  one  in  the  South  and  West  of 
Ireland ;  and  as  that  trade  would  not  employ  all  the  capital  that  is  required  in  the  win- 
ter season,  the  effect  would  be,  if  sovereigns  were  substituted  for  small  notes,  that  the 
extra  supply  required  for  the  corn,  beef,  and  pork  trade,  must  remain  idle  in  the  bank- 
er's chest,  or  be  remitted  at  great  risk  and  expense  for  employment  elsewhere  during 
the  summer  and  autumn. 

"  Do  you  think  if  a  metallic  circulation  were  adopted  that  there  would  be  a  difficulty 
in  maintaining  that  metallic  circulation?  —  I  do ;  because  the  trade  in  the  South  and 
West  of  Ireland  is  periodical ;  the  remittances  from  those  districts  of  Ireland  would 
force  the  gold  away  at  certain  periods,  and  it  must  be  returned  at  others  with  consider- 
able expense  to  meet  the  trade  of  the  country."  (Commons'  Report,  pp.  250,  251.) 

2.  A  gold  currency  would  be  more  inconvenient  than  notes,  and  would 
not  be  so  well  liked  by  the  people. 

LEONARD  DOBBIN,  Esq.,*  Agent  for  the  Northern  Banking  Company  of  Belfast,  at  Ar- 
magh. 

"  Do  the  people  of  the  North  of  Ireland  manifest  any  wish  for  gold  in  preference  to 
notes,  or  for  notes  in  preference  to  gold  ?  —  They  decidedly  prefer  notes,  and  the 
weavers  have  refused  to  carry  gold  out  of  the  market  lately. 

"  Can  you  assign  any  reason  for  this  preference  ?  —  There  are  many  reasons  that  I 
could  assign.  The  bank  notes  are  now  the  established  currency ;  the  people  are  per- 
fectly acquainted  with  them.  If  a  man  should  lose  notes,  or  a  house  be  robbed,  or  if 
there  is  a  forgery,  it  would  be  much  better  for  them  to  trace  notes  than  it  would  gold. 
I  have  often  assisted  poor  people  in  tracing  notes  that  were  robbed,  and  forged  notes, 
whereas  the  gold  could  not  be  traced  so  readily.  Another  reason  I  would  give  is  this; 
guineas  became  light,  and  were  troublesome  to  the  people.  When  standing  beam 
there  was  Is.  charged,  and  when  lighter  than  standing  beam,  2s.  Gd. ;  and  when  gold 
was  scarce,  and  bank  notes  not  a  legal  tender,  the  land  agents  refusing  to  take  any 
thing  but  gold,  the  tenants  were  obliged  to  pay  from  Is.  to  4s.  on  a  guinea  discount. 
Some  agents  would  only  take  gold."  (Commons'  Report,  p.  243.) 

J.  A.  SMYTH,  Esq.,  Linen  Merchant,  and  Agent  for  the  Belfast  Bank  at  Londonderry. 

"  I  am  in  the  habit  of  employing  my  linen  buyers  to  go  to  the  country  markets,  and 
I  must  supply  them  with  the  week's  money  before  they  start,  perhaps  five  hundred  or 
a  thousand  pounds  ;  they  have  to  go  through  the  interior  of  the  country,  and  do  not 
return  for  a  week.  They  make  their  purchases  all  in  small  quantities,  and  it  is  more 
convenient  for  them  to  carry  notes  than  gold."  (Lords'  Report,  p.  7.) 

ARTHUR  GTJINESS,  Esq.,  Director  of  the  Bank  of  Ireland. 

"  I  conceive  that  with  the  persons  who  handle  the  circulation  of  the  country,  there  is 
a  decided  preference  in  favor  of  small  notes  over  cash  in  every  respect.  I  speak  from 
mine  own  experience ;  for  I  remember  perfectly  well,  before  the  restrictions  upon  cash 
payments,  when  gold  was  a  great  inconvenience  in  trade.  I  speak  of  those  who  handle 
the  currency  of  the  country,  among  whom  I  think  the  preference  is  in  favor  of  the 
small  notes,  as  more  convenient,  more  portable,  and  less  liable  to  counterfeit.  I  con- 
ceive these  to  form  the  general  ground  of  preference."  (Commons'  Report,  p.  237.) 

3.  The  profits  of  the  banking  establishments  would  be  so  much  dimin- 
ished, that  they  could  not  extend  the  same  accommodation  to  the  agricul- 
tural and  commercial  classes. 

W.  P.  LUNNEL,  Esq.,  Director  of  the  Bank  of  Ireland. 
"If  the  notes  under  £5  were  prohibited,  would  the  profits  of  the  Bank  of  Ireland 

*  This  gentleman  was  afterwards  agent  for  the  Bank  of  Ireland  at  Armagh,  and 
M.  P.  for  that  place. 

FF  *  377 


A  Trtatite  on  Banking. 

W  mawrfalhr  affected  bjr  rach  prohibition  t  —  I  should  expect  that  they  would  suffer 
towr  BBBjBi  MOUC9  A  certain  profit. 

"  Hntr  you  conddCNd  towhnt  extent  the  profits  of  other  hankers  would  he  affected  ' 
—  I  should  expert  that  the  principal  circulation  of  tin-  mini::  -   in   small 

tberabrv  in  tlmi  |)ni|M>ni»n  ihcy  would  tufTer."    (Aon/     .  108.) 


JOHS  11.  •  i  vi  «  I!..  i  -TON.  Esq.,  Banker  at  Btifuit. 

nil  the  note*  umlcr  £5  were  prohibited  to  l>e  i^ued.  would  it  l>e  worth  while,  in 
your  opinion,  lo  keep  the  establishment  of  a  Imnk  at  Bel  fa*  t  ?  —  I  do  nf.t  think  it 
woold.  except  by  carrying  it  on  in  tin-  same  niiinncr  ni  it  formerly  WHS,  —  in  keep  n 
discount  olHce,  charging  »  commi-i  n  <>n  discounting  bills.  U-cansc  £5  notes  »..'..  I 
not  circulate  ;  then  oar  circulation  would  be  so  trilling  it  would  not  answer."  (Il>id. 

P.M. 

II.  A.  DOUOLAB,  Esq.,  Director  of  the  Provincial  Dank  of  Ireland. 

consider  the  cash  account  system,  and  the  one  pound  circulation  so  conn 
that  if  the  note*  arc  withdrawn,  it  i*  understood  that  our  e.stahli-lmn  -nt  will  not  gnrnt 
any  farther  cash  credits.    The  business  «  hii-h  wp  carry  on,  even  if  we  charged  a  hi^licr 
rate  of  interest,  or  a  commis,i<in.  would  not  lx-  of  Mifticient  maL'tiitud<'  to  repay  IIH  for 
the  expense  of  oar  e»tahli>hmcnt.  independent  of  our  notes.    If  the  i--uc  of  -mar 
be  withdrawn,  then  we  cannot  afford  to  allow  interest  on  deposits."     (Lord*1  /.V;«/r/, 
pp.  24,  26,  27.) 

4.  The  abolition  of  small  notes  would  prevent  the  investment  of  British 
capital  in  the  present  banking  establishments. 

T.  S.  RICK,  Esq.,  M.  P.,  and  Director  of  the  Provincial  Bank  of  Ireland* 

"  In  it  your  opinion,  that  if  all  notes  under  £  5  were  abolished,  a  con-sideniMe  incon 
Tenience  would  arise  in  the  ordinary  traffic  in  Ireland?  —  I  conceive  that  it  wonld.  I 
conceive  that  the  first  effect  of  the  cxtinc  tion  of  all  notes  below  £5  wonld  he  a  much 
more  considerable  diminution  of  the  general  mass  of  the  circulating  medium  in  Ireland 
than  in  Kngland. 

"I  fear  extremely  that  if  any  thing  were  to  occur  which  materially  diminished  the 
profits  of  oar  establishment,  it  would  have  ih.-  etV.-et  of  depriving  n-  of  one  of  the  chief 
benefits  of  the  establishment,  namely,  the  support  and  control  of  British  capitalist*, 
and  conducting  the  bank  by  British  merchants,  and  upon  British  commercial  princi- 
ples. I  conceiTe  a  rate  of  profit,  rather  higher  than  the  average  rate  of  profits,  is  es- 
tential  to  induce  persons  so  circumstanced  to  enframe  in  such  a  lui'-ine--.  more  particu- 
larly when  it  is  considered  that  there  is  no  limitation  of  responsibility  by  the  grant  of 
charters."  (LoraV  Report,  pp.  47,  51.) 

5.  The  gold  currency  would  be  sent  out  of  the  country,  whenever  it 
bore  a  premium  in  England. 

H»:MIT  H.  Hi  NT.  K*'|.,  Ijocal  Dirrctar  of  the  Provincial  Dank  of  Ireland,  at  Watrrf-ml. 

"What  do  yon  think  wonld  be  the  consequence  of  a  law  which  prohibited  the  N-n-- 
of  notes  below  £5,  both  by  the  Bank  of  Ireland  and  by  any  other  banking  establish- 
ment in  Ireland  1  —  I  should  think  it  would  be  very  hazardou-  in.  iced  :  I  should  very 
much  apprehend  that  the  gold  circulation  wonld  at  times  be  irithilrnmt  in  a  ver\ 
degree  from  tke  country,  whenever  gold  was  wanted  in  London  ;  for  instance,  A  SMALL 
ntEMtm  crow  A  •OTKKEIOH  WOULD  INDUCE  A  VAST  QUANTITY  OF  THEM  TO  BB 
aiorcHT  OI-T  or  IBELAWD. 

Have  TOO  ever  known  instances  of  quantities  of  gold  being  brought  over  from  Ire- 
land to  this  coantryi  and  persons  making  a  regular  traffic  of  it?  —  I  have."  (Com- 
rnout,  Report,  pp.  73,  74.) 

6.  The  proposed  measure  would  cause  general  distress,  and  prevent 
the  progress  of  enterprise. 

•  Now  Lord  Monteagle. 
378 


Currency  in  Ireland. 


JOHN  ROBINSON  PIM,  Esq.,  General  Merchant  in  Dublin. 

"  The  very  idea  of  curtailing  the  currency  under  £  5  would  have  a  tendency  to  dis- 
courage all  adventure  in  Ireland  at  present.  I  should  not,  for  one,  be  careful  of  plac- 
ing money  in  any  kind  of  machinery  till  the  effect  was  tried.  I  fancy  it  would  reduce 
property  very  much  in  that  country,  —  and  sometimes  fancies  are  almost  as  bad  as 
reality."  (Lords'  Report,  p.  19.) 

The  following  table  was  given  in  by  Mr.  Murray  to  the  Committee  of 
the  House  of  Lords,  showing  the  circulation  of  Ireland  since  the  passing 
of  the  Act  of  1845  :  — 

ABSTRACT  of  the  RETURNS  by  the  several  BANKS  OP  ISSUE  IN  IRELAND  under  the  Pro- 
visions of  the  Act  8th  Sf  9th  Victoria,  cap.  37.  From  3d  January,  1846,  to  20th  May, 
1848. 


For  the 

Certified 

Notes  of  £5     XT..—      Total  Issue 

Total  Specie 

Four  Weeks 

Issue  of  all 

and 

ilUltKJ 

of  all  the 

Gold  held. 

Silver  held. 

held  by  all 

ended 

the  Banks. 

upwards. 

under  £  5. 

Banks. 

the  Banks. 

1*46. 

£ 

£ 

£ 

£ 

£ 

£ 

£ 

3d  Jan.     .    . 

6,354,194 

3,039,855 

4.364,509 

7,404,366 

2,221,944 

267,308 

2,489,254 

31st  Jan.    . 

6,354,494 

3,052,163 

4,353,533 

7,410,751 

2;252.RS7 

298,145 

2,531,032 

23th  Feb.      . 

6,354,494 

3,066,529 

4,403,198 

7,469,729 

2,262,714 

304,582 

2,567,300 

23th  March, 

6,354,494 

3,071,589 

4,373,371 

7,444,960 

2,246,022 

322,131 

2,568,158 

25th  April,   . 

6,354,494 

3,170,291 

4,366,031 

7,536,323 

2,204,748 

321,861 

2,526,613 

23d  May,    . 

6,354,494 

3,223,469 

4,193,610 

7,422,030 

2,177,633 

321,310 

2,493,945 

20th  June,    . 

6,354,494 

3,072,053 

3,899,973 

6,972,026 

2,082,018 

332,981 

2,415,002 

18th  July,  . 

6,354,494 

3,003.914 

3632,577 

6,636,491 

1,903,216 

353,567 

2,266,786 

15th  Aug.     . 

6,354.494 

2,959,671 

3,520,844 

6,480,517 

1,887,457 

376,335 

2,263,795 

12th  Sept.  . 

6.354,494 

3,013,054 

3,575,118 

6,538,175 

1,832,938 

349,980 

2,182,922 

10th  Oct.      . 

6,354,494 

3,183,979 

4,067,575 

7,251,555 

1,894,453 

345,812 

2,240,267 

7th  No/.    . 

6,354,494 

3,335,209 

4,501,616 

7,836,825 

2,131,587 

353,447 

2,485,034 

5th  Dec. 

6,354,494 

3,273,326 

4,566,204 

7,839,530 

2,253,124 

316,467 

2,569,595 

1847. 

2d  Jan. 

6.354,494 

3,151,117   . 

4,364,295 

7,515,414 

2,264,266 

343,740 

2,608,012 

30th  Jan.  . 

6,354,404 

3,161,701 

4,097,724 

7,259,426 

1,999,140 

384,091 

2,383,236 

27th  Feb.      . 

6,354,494 

3,158,358 

3,871,694 

7,030,053 

1,795,792 

333,389 

2,179.184 

27th  March, 

6,3.-)4,49i 

3,123,516 

3,581,218 

6,704,736 

1,710,405 

403,693 

2,114,100 

24th  April,   . 

6,354,494 

3,163,465 

3,357,768 

6,521,234 

1,547,530 

445,010 

1,992,515 

22d  May,  . 

6,354,494 

3,036,115 

2,932,305 

6,018,420 

1,162.163 

520,506 

1,632,6S2 

19th  June,    . 

6,354,494 

2,835,513 

2,629,436 

5,464,951 

1,028,579 

520,299 

1,548,832 

17th  July, 

6,354,494 

2,740,914 

2,516,464 

5,257,378 

993,810 

663,524 

1,557,337 

14th  Aug.     . 

6,354,494 

2,670,376 

2,426,869 

5,097,245 

969,590 

697,627 

1,567,221 

1  1th  Sept. 

6,354,494 

2,581,063 

2,467,246 

5,048,310 

966,818 

565,399 

1,532,222 

9th  Oct. 

6,354,494 

2,636,692 

2,718,920 

6,355,613 

1,006,066 

611,643 

1,517,712 

6th  Nov.  . 

6,354,494 

2,714,939 

2,804,374 

5,519,314 

1,045,805 

490,718 

1,536,526 

4th  Dec. 

6,354,494 

2,597,237 

2,725,002 

6,322,741 

1,087,074 

503,692 

1,590,770 

1848. 

1  at  Jan.        . 

6,354,494 

2,502,756 

2,693,357 

5,196,116 

1,112,955 

505,800 

1,618,760 

29th  Jan.  . 

6,354,494 

2,528,633 

2,705,281 

5,233,916 

1,132,937 

631,806 

1,664,746 

26th  Feb.     . 

6,354,494 

2,510,595 

2.709,483 

5,220,030 

1,111,032 

562,846 

1,706,882 

2oth  March, 

6.354,494 

2,505,565 

9,601,829 

5,107,395 

1,095,722 

584,711 

1,680,437 

22d  April,     . 

6,354,494 

2,540,489 

2,463,542 

5,009,033 

1,071,297 

651,568 

1,622,86.3 

20th  May, 

6,354,494 

2,561,459 

2,279,211 

4,840,672 

1,087,162 

601,318 

1,588,485 

93,235,610    109,829,727   203,065,375     61,656,884    13,740,306       eo,*97,3lO 
AVERAGES  of  the  preceding  Returns. 


Average  for  whole  Period 
Average  for  the  year  1846  . 
Average  for  the  year  1847 
Average  for  the  first  Five  Monthi 

of!846 

Average  for  the  first  Five  Months 

of  1847    . 
Average  for  the  first  Five  Months 

ofl348    .        .        .        . 


Notes  'of  £5 
and  upwards. 

Notes  un- 
der £  5. 

Total. 

Gold. 

Silver. 

Total 
Specie. 

£ 

£ 

£ 

£ 

£ 

£ 

2,913,612 

3,432,178 

6,345,791 

1,611,152 

429,384 

2,040,640 

3,121,259 

4,144,461 

7,265,721 

2,106,004 

334,253 

2,410,266 

2,844,049 

2,986,375 

6,830,425 

1,263,517 

491,953 

1,766,476 

3,116,809 

4,339,953 

7,456,768 

2,224,800 

313,605 

2,538,409 

3,138,631 

3,568,141 

6,706,773 

1,643,006 

427,337 

2,070,349 

2,529,348 

2,552.869 

5,082,219 

1,106,230 

546,449 

1,652,633 

379 

A  Trtalise  on  Banking. 

The  last  Return  of  the  Circulation  of  Ireland  is  as  follows :  — 

Aruuoi  CI»CTOATIOH  ottd  Coiif  Md  by  fA«  IRISH  BANKS  during  ike  four  imdb 
ndtmy  Saturday,  the  24/A  day  of  March,  1849. 

Arerm|« 


Na«M  of  Bttka, 
(Unk  of  Inland 

Authorial 
Circulation. 

.3,739,488 

Areran  Circulation  durlii(F»ur   AiiM>uni  of 
WMK*  •nding  a*  abova.        Gold  It  Hivw 
held 
£5  and       Under        -,,.       dwtagfbw 
upwank.       JC6.              "••    We«k«endlnf 
M  abora. 

£               £              Ji               £ 

\'-\  ,in     m  :"•"  •-'  M  M     -••.«.» 

89,997       186,486       216,423       \IQ,S» 
83,887       148,251        171,638         94,066 
19,085       181,371       900,396         67,847 
197,173       3113,340       600,614        257,072 
3,888          6,073          9,968          3,738 
:         20,274         37,775         17,731 

piartaeial  Rank    . 

927,667 

.    861,611 

N.«nh§rn  Bank 

843,440 

UbMrBaok                     ,        - 

.    : 

'• 

.      »4,(H4 

Ttmritri  '"-  " 

Touli 


.     6,364,494    8^*4,610    2,167,238     4,401,750    1,708,867 


We  have  noticed  the  different  meanings  given  to  the  word  "  circula- 
tion "  in  England,  since  the  passing  of  the  Act  of  1844.  By  the  Act 
of  1845,  it  is  enacted  that  this  word  shall  have  the  following  meaning  in 
Scotland  and  Ireland  :  — 

"Section  17.  —  And  b«  it  enacted,  That  all  bank  notes  shall  be  deemed  to  be  in  cir- 
rnUtion  from  the  time  the  same  .-hall  huvf  l>< •<  n  i»-tu-il  from  tiny  luinki-r,  or  any  scr- 
rant  or  agent  of  such  banker,  until  ilic  snmc  shall  have  been  actually  returned  to  such 
banker,  or  some  servant  or  agent  of  such  Imnkcr." 

It  may  be  useful  to  trace  the  effects  of  this  Act  (the  Act  of  1845,  8 
&  9  Viet  c.  37)  upon  the  state  of  banking  in  Ireland,  as  compared  with 
the  effects  of  similar  enactments  in  Scotland  and  England. 

1.  The  limitation  of  issue  in  Ireland,  as  in  Scotland,  is  not  absolute. 
The  banks  may  issue  beyond  this  limit,  if  they  retain  an  amount  of  <r<>l<l 
and  silver  equal  to  this  excess.  In  England  the  prohibition  is  absolute. 
The  probable  effect  will  be,  that  th<  s<  -enactments  will  not  lead  to  any 
permanent  decrease  of  the  circulation  in  Ireland  or  Scotland.  The  hanks 
will  merely  import  more  gold  when  the  circulation  increases.  In  Eng- 
land it  seems  probable  that  the  circulation  will  permanently  decrease. 
Means  will  be  employed  to  conduct  banking  operations  with  fewer  t 
and  these  means  will  operate  at  all  times,  when  the  circulation  is  low, 
M  well  as  when  it  is  high. 

The  provision  of  the  Act  of  1845,  which  requires  the  banks  of  Scot- 
land and  of  Ireland  to  keep  an  amount  of  gold  equal  to  the  notes  in  circu- 
lation beyond  the  fixed  limits,  tends,  as  we  have  observed,  to  restrict  the 
granting  of  canh  credits  in  Scotland.  We  doubt  if  it  will  have  an  equal 
effect  in  Ireland,  simply  because  the  cash-credits  exist  only  to  a  limited 
•Merit.  The  Provincial  Bank  introduced  the  system  in  1825  ;  and  no 
tyitcm  could  be  better  adapted  to  the  state  of  the  country.  It  would 
doubtleM  hare  greatly  improved  the  condition  and  the  habits  of  the  peo- 
ple ;  but  the  iniquitous  runs  for  gold  which,  at  the  suggestion  of  reckless 


Bank  Circulation. 

politicians,  took  place  in  1828,  1830,  1831,  and  1833,  compelled  the 
banks  to  restrict  their  operations.  Had  the  banks  remained  without  mo- 
lestation, the  whole  of  the  agricultural  districts  of  Ireland  would  probably 
by  this  time  have  had  the  benefits  of  this  system,  with  the  same  benefi- 
cial results  which  have  been  realized  in  Scotland. 

2.  In  Ireland  these  measures  will  not  tend  to  produce  so  great  an  in- 
crease of  gold  as  in  Scotland.     In  Scotland  the  banks,  previous  to  the 
passing  of  the  Act,  kept  but  a  small  amount  of  gold.     But  in  Ireland  the 
banks,  from  their  liabilities  to  runs,  have  always  kept  large  deposits  of 
gold.     The  amounts  required  by  the  Act  are  not  larger  than  those  for- 
merly kept  in  their  vaults.     It  appears  from  the  returns,  that  the  Bank  of 
Ireland  has  recently  kept  a  smaller  amount  than  before  the  passing  of  the 
Act.      Hence  their  means  of  affording  accommodation  are  not  dimin- 
ished ;  and  as  they  sustain  no  loss,  they  have  no  reason  for  increasing 
their  charges.     It  may,  however,  confirm  the  Irish  banks  in  their  regula- 
tion not  to  give  interest  on  current  accounts.     Nowhere  throughout  Ire- 
land is  this  system  now  followed.     The  Bank  of  Ireland  gives  no  interest 
on  any  class  of  lodgments.     The  joint-stock  banks  allow  it  only  on  depos- 
it receipts.     The  reason  assigned  by  the  Scotch  banks  was  that  the  oper- 
ations on  these  accounts  maintained  in  circulation  a  large  amount  of  their 
notes.     This  will  be  no  advantage  if  the  bank  must  retain  an  amount  of 
gold  equal  to  this  increase  of  notes  in  circulation. 

3.  The  prohibition  of  new  banks  of  issue  has  operated  variously  in  the 
three  countries.     In  Ireland  it  was  beneficial ;  in  Scotland  it  has  been 
harmless  ;  and  in  England  it  is  injurious.     The  Agricultural  Bank  of  Ire- 
land caused  considerable  mischief.     To  prevent  the  recurrence  of  such 
evils,  the  most  effectual  way  was  to  prohibit  the  formation  of  new  banks 
of  issue.     Hereafter  this  restriction  may  become  oppressive.     Cork,  and 
Limerick,  and   Waterford  may  become  sufficiently  wealthy  to  supply  a 
banking  capital,  and  may  wish  to  form  local  banks.     The  local  banks  at 
Belfast  have  conferred  great  benefits  on  the  north  of  Ireland.     In  Scot- 
land the  banks  are  sufficiently  numerous  ;  and,  as  they  are  allowed  to 
unite,  the  authorized  issue  of  notes  is  never  likely  to  be  less  than  it  is. 
And  although  restrictions  on  banks  are  unsound   in  principle,  they  may 
not  at  present  do  any  harm  in  Scotland.     In  England  the  restriction  is  in- 
jurious.    Had  we  an  unlimited  power  of  forming  new  banks,  many  of 
those  firms  that  now  consist  of  not  more  than  six  partners  would  be 
merged  in  larger  establishments.     The  number  of  banks  would  be  less, — 
the  amount  of  their  issues  would  probably  be  less,  —  but  they  would  attract 
a  higher  degree  of  public  confidence,  and  their  character  and  continuance 
would  not  be  dependent  upon  the  lives  of  individual  partners. 

4.  Unions  of  Banks  in  either  Ireland  or  Scotland  are  not  very  likely, 
nor  perhaps  desirable.     The  banks  are  large,  have  a  respectable  capital, 
and  enjoy  the  public  confidence.     In  England,  many  banks  are  small,  and 
have  small   capitals.     Union   among  them  would  be  highly  beneficial. 
Yet  such  is  the  waywardness  of  legislation,  that  the  Acts  of  1844  and 
1845  give  facilities  to  unions  in  Ireland  and  Scotland,  and  restrict  them 
in  England.     In  Ireland  and  Scotland  two  banks  of  issue  may  unite,  and 
the  united  bank  have  the  united  circulation.     In  England,  if  two  banks  of 

381 


A  Treatise  on  Banking. 

issue,  either  of  which  has  more  than  six  partners,  should  unite,  the  circu- 
lation of  one  or  both  of  these  banks  would  be  lost. 

5.  The  Act  passed  in  1MI,  f..r  tin-  regulation  of  joint-stork  Iwuiks  in 
K  .  \\  extend.  I  in  ISIti  t<>  Scotland  and  Ireland,  With  to  Mission 

of  the  clause  that  rendered  the  bnnks  subject  to  the  laws  of  hanknij 
By  a  clause  in  these  Acts,  any  bank  for  the  formation  of  which  proceed- 
ings had  been  taken  1*  !.>n-  the  (>th  May,  and  which  was  actually  in  busi- 
ness on  the  4th  of  July,  must  at  the  end  of  a  year  after  the  passing  of  the 
Act<  ;ro  from  business  or  take  a  charter.     The  1'reston  Banking 

Company  was  in  this  case,  and  accordingly  became  a  chartered  bank. 
This  is  the  only  bank  that  lias  a  charter  under  the  Act  in  England.     The 
tange  Bank  of  Scotland  was  in  a  similar  cose,  and  on  the  31st  of  De- 
•er,  1846,  became  a  chartered  bunk.     There  is  no  bank  of  this  kind 
in  Ireland. 

From  the  extracts  we  have  made  from  the  Act  at  p.  308,  it  will  be 
seen  that  no  new  joint-stock  bank  can  be  fonncd  of  a  less  nominal  cap- 
ital than  £  100,000,  and  half  the  capital  must  be  paid  up  before  the  com- 
mencement of  business ;  that  the  assets  and  liabilities  of  the  company 
must  be  published  once  at  least  in  every  month ;  and  that  at  least  one 
fourth  of  the  directors  shall  retire  yearly,  and  shall  not  be  eligible,  for 
reelection  for  at  least  twelve  calendar  months.  As  a  specimen  of  the 
monthly  returns  required,  we  copy  from  the  London  Ga-.ctte  the  last  re- 
turn of  the  Preston  Banking  Company  :  — 

Account  of  the  ASSETS  and  LIABILITIES  of  the  PRESTON  BANKING  COMPANY,  at 
Proton,  on  Saturday  the  7th  day  of  April,  1849. 

AftftETS.  LIABILITIES. 

Bills  of  Exchange,  Bank  Premises,  Prelim-  Capital  stock              .    £  100,000    0    0 

inarr  Expenses,  Loans,  &c.,  Cash    in  Deposits,  and  other  Lia- 

Bun'k,  ana   Deposits  in  other  Banking  l>ilitics    .         .        .        206,899    4    3 

Establishments      .        .    £309,65821  Undivided  Profits  .        .        2,7581710 

£309,658  2  1  £309,658     2     1 

That  provision  of  the  act  which  requires  one  fourth  of  the  directors  to 
retire  annually,  and  which  declares  them  ineligible  for  election  for  one 
year,  has  been  the  subject  of  much  discussion.  The  object  of  the  Legisla- 
ture appears  to  have  been  to  prevent  those  evils  which,  in  public  compa- 
nies of  every  kind,  occasionally  arise  from  the  undue  ascendency  of  indi- 
vidual directors.  Practically,  it  may  be  injurious  oradvantageous  to  a  bank, 
according  to  circumstances.  On  the  one  hand,  it  may  deprive  a  bunk  of 
the  services  of  its  most  useful  directors  for  one  year.  And  on  their  return, 
they  may  be  less  useful  than  heretofore,  from  being  less  acquainted  with 
the  transactions  that  have  taken  place  during  their  absence.  In  small 
country  banks  it  might  not  be  easy  to  find  other  parties  to  take  the  places 
of  the  directors  who  had  thus  retired.  On  the  other  hand,  it  has  been  con- 
tended that  the  number  of  the  directors,  and  consequently  their  influence, 
would  thus  be  virtually  increased,  —  that,  while  on  some  occasions  the 
most  clever  directors  would  be  compelled  to  retire,  ut  other  times  the 
least  clever  would  retire,  and  their  places  might  be  better  supplied,  —  that 
the  retirement  of  even  the  most  clever  might  call  forth  the  energies  of  the 


Ireland  Bank  Circulation. 

others,  and  thus  the  talents  of  the  whole  might  be  improved,  —  that  the 
plan  tends  to  prevent  the  undue  ascendency  of  any  individual  director,  or 
of  any  knots  or  parties  of  directors,  for  any  length  of  time,  — and  that  it  is 
a  convenient  means  of  getting  rid  of  an  inefficient,  injurious,  or  disagree- 
able director  :  for,  as  when  he  is  once  out,  it  would  be  easy  for  the  board, 
if  so  disposed,  to  prevent  his  reelection.  By  the  charter  of  the  Bank  of 
Ireland,  fifteen  directors  are  chosen  annually,  and  not  above  two  thirds  of 
the  directors  of  the  preceding  year  can  be  reflected. 

6.  There  is  another  difference  between  Scotland  and  Ireland  with  ref- 
erence to  banking  operations,  though  it  does  not  arise  from  the  above- 
mentioned  Act.  At  the  time  of  the  union  between  England  and  Ireland, 
Ireland  had  her  debts  as  well  as  England.  And  although  England  be- 
came liable  for  these  debts,  the  dividends  continued  to  be  paid,  and  the 
transfers  made  in  Dublin.  Hence  Government  stock  is  bought  and  sold 
there  in  the  same  way  as  in  London.  Besides  this,  any  party  may  pur- 
chase stock  in  Irelandj  and  have  it  transferred  to  England,  or  the  reverse. 
The  plan  is  this  :  —  Any  person  holding  stock  may  go  to  the  Bank 
of  England,  either  personally  or  by  power  of  attorney,  and  get  a  ticket 
that  will  authorize  him  to  have  the  same  amount  of  stock  put  in  to  his 
name  in  Ireland.  The  stock  in  England  is  then  transferred  to  the  com- 
missioners for  the  reduction  of  the  National  T)ebt.  He  may  go  to  the 
Bank  of  Ireland  in  Dublin  and  reverse  the  operation.  Several  Acts  of 
Parliament  have  been  passed  with  reference  to  this  subject.  The  last  is 
the  5th  Geo.  IV.  c.  53,  passed  in  the  year  1824.  When  there  is  a  great 
difference  in  the  price  of  stocks  in  the  two  countries,  operations  of  this 
kind  may  be  very  profitable. 

This  power  of  transferring  government  stock  from  one  country  to  the 
other  has  a  tendency  to  equalize  the  price  in  both  countries.  It  also 
serves  the  purpose  of  a  medium  of  exchange.  A  transmission  of  stock 
has  the  same  effect  in  rectifying  the  exchanges  as  a  transmission  of  gold. 
And,  doubtless,  the  exchanges  between  England  and  foreign  countries 
might,  to  a  great  degree,  be  adjusted  in  the  same  manner. 

There  is  a  Stock  Exchange  in  Dublin  similar  to  that  of  London,  estab- 
lished for  the  purchase  and  sale  of  Government  stock,  bank  stock,  railway 
shares,  &c.  No  person  can  transact  business  there  unless  he  has  ob- 
tained a  license  from  the  Lord  Lieutenant.  The  number  of  these  persons 
is  at  present  about  twenty-five.  There  are  no  time-bargains  as  in  London. 
The  borrowing  and  lending  of  money  on  stock  are  matters  of  daily  occur- 
rence. This  is  not  always  done  through  brokers.  Individuals  often  effect 
these  transactions  directly  with  the  banks.  The  general  rule  is,  that  the 
lender  shall  have  a  margin  of  5  per  cent,  on  the  value  of  the  stock,  and 
shall  be  entitled  to  call  for  additional  security  whenever  the  market  price 
falls  below  that  difference. 

The  Exchanges  between  the  Banks 

Since  the  Act  of  1845  —  when  other  banks  besides  the  Bank  of  Ireland 
acquired  the  power  of  issuing  notes  in  Dublin  —  a  system  of  clearing,  or, 
as  it  is  called,  of  exchanges,  has  been  established,  similar  to  that  estab- 
lished in  Edinburgh. 

383 


A  Trtaiitt  on  Banking. 
The  following  is  a  copy  of  a  clearing  balance-sheet :  — 


»«•  10  rr. 

wrra 

DOB  BY  1T. 

Bank  of  Ireland. 

Provincial  Bank. 

National  Bank. 

Northern  Bank. 

Belfast  Bank. 

Ulster  Bank. 

,  1849. 


Here  we  may  observe  that  nil  the  banks  that  clear  are  hanks  <>( 
and  the  clearing  in  Dublin  includes  all  the  banks  of  issue  in  Ireland,  al- 
though three  of  these  banks  have  their  head  quarters  in  Belfast.  The 
FJclfast  banks  clear  by  their  agents.  The  Bank  of  Ireland  is  the  agent 
for  the  Northern  Bank  and  the  Belfast  Hank,  and  the  Royal  Hank  (if  Ire- 
land is  the  Dublin  agent  for  the  Bank  of  Ulster.  It  will  also  be  observed 
that  the  Bank  of  Ireland  —  the  chartered  hank  —  is  a  member  of  the 
clearing ;  and,  in  fact,  the  clearing  is  held  daily,  at  two  o'clock  in  one  of 
the  rooms  of  that  establishment.  The  differences  are  paid  daily,  like 
those  at  Edinburgh,  in  exchequer  bills.  The  following  arc  the  amounts 
required  to  be  held  by  each  bank  :  — 


The  Bank  of  Ireland, 
The  Provincial  Hunk, 
The  National  Bank,    . 
The  Northern  Bank, 
The  Belfast  Bank,      . 
The  Ulster  Bank, 


£134.000 

48.000 
80,000 

80,000 
30,000 

£  330,000 


Those  banks  in  Dublin  that  are  not  banks  of  issue  are  not  nu  ml 
the  clearing.  Although  the  Royal  Bank  of  Ireland  attends  the  clearing 
as  the  agent  of  the  Ulster  Bank,  it  does  not  clear  on  its  own  account.  All 
the  non-issuing  banks,  however,  have  accounts  with  the  Bank  of  Ireland, 
and  pay  into  that  establishment  the  cheques  they  may  have  on  the  other 
hanks.  The  National  Bank,  though  an  issuing  bank,  and  a  member  of 
the  clearing,  has  no  account  with  the  Bank  of  Ireland. 

This  system  of  clearing  appears  to  work  very  satisfactorily-  The  fol- 
lowing is  an  extract  from  a  letter  I  received  a  few  days  ago  from  an  Irish 
banker,  on  the  subject :  — 

•  The  SStdsBMiit  of  our  '  exchange  balances'  in  Dublin,  through  the  use  of  excheq- 


Irish  Bank  Exchanges. 

oer  bills,  works  very  well.  The  great  evil,  previously,  was,  that  when  these  balances 
were  ot  magnitude,  Dublin  was  such  a  limited  money  market  there  was  difficulty  and 
expense  m  raising  the  needful  quantity  of  Irish  money  for  the  purpose.  If  you  antici- 
pated the  balance  to  be  heavy  against  you,  it  was  requisite  to  prepare  some  time  before 
and  to  have  your  funds  lying  idle  and  unproductive  until  the  crisis  arose.  Now  we 
have  exchequer  bill  interest  for  our  surplus,  and  the  power  of  replenishing  our  stock  ac- 
count whenever  required  by  drawing  on  London,  thus  possessing  the  unbounded  advan- 
tages of  the  greatest  money  market  in  the  world.  In  point  of  fact,  the  arrangement  has 
virtually  changed  the  venue,  and  made  London  the  actual  and  final  place  of  settlement 
through  machinery  worked  in  Dublin." 

The  following  are  the  "  Regulations  for  making  exchanges  between 
the  several  banks  in  Ireland,  at  Dublin,  and  for  settling  the  balances  of 
such  exchanges,  at  Dublin  ;  to  take  effect  from  and  after  the  8th  day  of 
December,  1845." 

"  1.  The  exchange  shall  be  made  daily  at  two  o'clock,  P.M. 

"2.  The  payments  of  the  balances  shall  be  made  in  exchequer  bills,  except  for  the 
fractional  parts  of  £500  which  may  be  paid  in  the  notes  of  the  particular  bank  debtor. 

"3.  The  exchequer  bills  shall  be  filled  up  in  favor  of  the  bank  who  may  be  the  orig- 
inal holders,  and  shall  bear  the  distinguishing  mark  of '  Dublin  Exchange  Bills,'  show- 
ing that  they  belong  to  the  Dublin  exchanges,  and  are  not  intended  to  be  used  for  any 
other  purpose,  and  shall  be  received  at  par,  with  the  interest  that  may  be  due  when  the 
transfer  takes  place. 

"4.  The  amount  of  exchequer  bills  to  be  kept  in  the  circle  is  fixed  at  £330,000,  to 
be  apportioned  amongst  the  following  banks  in  fixed  sums,  calculated  in  their  respec- 
tive amounts  of  circulation :  — 

NAMES   OF   BANKS. 

Bank  of  Ireland.  Northern  Bank.  Ulster  Bank. 

Provincial  Bank.  Belfast  Bank.  National  Bank. 

The  sums  being  once  fixed,  each  bank  is  to  maintain  its  quota  at  all  times,  as  herein- 
after provided. 

"  5.  Nine  tenths  of  the  exchequer  bills  to  be  of  £  1,000,  and  one  tenth  of  £  500. 

"  6.  The  amount  of  exchequer  bills  held  by  each  bank  shall  be  stated  every  day  in 
the  Clearing-room. 

"7.  It  is  expedient  that  no  bank  shall  be  obliged  permanently  to  hold  more  exche- 
quer bills  than  a  surplus  of  one  third  above  the  fixed  amount,  nor  shall  be  allowed  to 
reduce  the  amount  held  more  than  one  third  below  the  fixed  amount ;  but  as  the  ex- 
chequer bills  will  accumulate  with  some  of  the  banks,  and  be  required  by  others,  it 
shall  be  imperative  on  the  parties  so  situated  to  sell  or  buy  exchequer  bills  ;  that  is  to 
say,  the  bank  holding  the  greatest  amount  of  exchequer  bills  shall  be  bound  to  sell  to 
the  bank  in  want  of  them,  what  may  be  required  for  the  legitimate  purposes  of  the  ex- 
changes ;  but  it  shall  not  be  imperative  on  that  party  to  sell  a  greater  amount  than 
what  will  reduce  their  stock  to  the  original  quota,  and  the  purchaser  shall  be  bound  to 
take  bills  from  those  parties  having  die  greatest  proportionate  amount  of  them  beyond 
their  respective  original  quota. 

"  8.  The  preceding  regulations  will  tend  in  a  great  degree  to  equalize  the  amount  of 
exchequer  bills  ;  but  if  exchequer  bills  shall  nevertheless  accumulate  in  the  hands  of  a 
bank,  so  as  to  exceed  their  original  quota  by  more  than  one  third,  that  party  shall  have 
the  power  to  call  upon  the  party  or  parties  holding  the  smallest  amount  in  proportion 
to  their  quota  to  purchase  the  excess  —  that  is  to  say,  the  excess  above  their  quota  — 
plus  one  third ;  but  it  shall  not  be  imperative  on  any  party  to  take  more  than  is  re- 
quired to  bring  up  their  stock  to  two  thirds  of  the  original  amount. 

"In  this  way  the  fluctuation  in  the  amount  of  exchequer  bills  amongst  the  different 
banks,  which  is  an  essential  part  of  this  arrangement,  need  never  permanently  exceed 
one  third  more  or  one  third  less  than  the  original  quota  of  each  bank. 

"  The  terms  of  purchase  to  be  governed  by  the  next  regulation. 

"  9.  The  bank  seeking  to  buy,  or  being  called  upon  to  buy,  exchequer  bills,  from  the 
bank  or  banks  holding  in  excess  of  their  quota,  shall  pay  for  the  purchase  by  a  Letter 
of  Credit  oa  their  London  correspondent,  demandable  on  the  fifth  day  after  the  date 
GG  385 


A  Treatise  on  Banking. 

thereof,  the  pwreha*«r  paring  I*.  ."W.  per  <•<  m  on  the  amount  of  tho  Letter  of  Crt>>1it ; 
]>*T  the  amount  in  gold  in  Dublin,  ut  the  option  of  the  holders  of  the  lulls 

••qucr  bull  to  be  uwd  for  the  1  )iililin  exchanges  arc  to  he  a»  nearly  a* 
poatible  divided  into  the  two  data*  of  March  hills  MM  J«N  hdk  whit  h  nro  to  be  ex- 
changed at  the  1'nymaater-GeneraT*  Oth.  ••  here  I.,  ton-  due.  ami  n.  \v  .....  -  to  I..-  |,i,.- 
Yided,  *o  a*  to  keep  up  the  itock  in  the  circle ;  and  no  exchequer  hilU  advcrtisi  d  to  be 
paid  are  to  be  own  in  the  exchanges. 

•  1 1     1  .».  ti  bank  U  to  be  alway*  liable  to  the  income-tax  on  tin-  interest  «f  its  ori/i- 

nal  qaola  of  exchequer  hills,  mid  no  more  ;  and  the  exchequer  dills  :id\.n  •  I   i..  I,.- 

renewed  are,  within  a  week  after  tin-  tiovernmcnt  noiico  appears  in  the  i;>iz-n,,  tc.  !..• 

the  original  holders.  ii|K)ii  receiving  other  hills  not  advertised,  failing  which, 

Ifa  on  Ixmdon.  dcmnndahlc  on  the  liAh  day  from  its  date.  Mil-ject  to  the 

rhnr^r  a«  Mated  in  No.  9,  ii  to  be  riven,  or  the  amount  to  be  paid  in  gold,  at  the  <>;• 

..f  tlie  holder*  of  advertised  hills. 

\-l.  The  exchange*  are  to  be  mode  at  the  Hank  of  In-hind,  who  undertake  to  pny 
thoM  bank*  who  are  creditors  in  the  exchange  the  exchequer  hills  or  \-\\\-  of  .  \ 

vcd  from  thote  bank*  who  are  debtors  in  the  exehaii^e  ;  l.nt  the  Hunk  of  In  land 

•hall  not  be  in  any  way  re*ponsible  for  the  exchange  transiu-tions,  or  otherwise  soever. 

.1    The  statement  of  the  balances  after  they  are  stniek  to  be  sent  to  their  re>pee- 

tire  bank*  from  the  Clearing-room,  by  their  clerks ;  and  the  clerks  of  hunks  creditor* 

to  be  in  waiting  to  receive  the  amount  due  to  them  at  two  o'clock. 

4  Any  bank  a  party  to  this  agreement  to  h:ive  the  |>owcr  of  withdrawing  from 
it,  and  n-ceiving  back  their  exchequer  bills  at  par,  upon  payment  of  them  if  needful, 
upon  ginnn  three  months'  notice. 

..  Xo  bank  a  party  to  this  arrangement  shall,  after  the  8th  of  December,  1 84.1,  di- 
rectly or  through  any  agent,  demand  gold  from  or  pay  gold  to  any  other  hank  or 
bank's  parties  to  this  arrangement,  except  M  hereinbefore  provided,  unless  under  spe- 
cial agreement  between  any  two  of  the  banks  they  mutually  arrange  to  pay  and  re- 
ceive a  sum  of  gold. 

"  It  U  assumed  that  each  bank  always  has  its  statutory  amount  of  gold,  and  if  any 
bank  tx«  either  in  excess  or  deficiency  in  that  amount,  the  export  or  import  of  gold 
uiu-t  be  liorne  by  the  bank  seeking  to  diminish  or  increase  its  stork. 

y  violation  of  this  regulation  after  the  8th  of  December,  1845,  to  be  considered  a 
virtual 'withdrawal  of  the  bank  who  departs  from  this  rule. 

1'.  The  foregoing  arrangements  are  to  be  subject  to  such  alterations  and  amend- 
ment* a*  may  be  required  and  agreed  on  by  the  several  banks  parties  thereto,  after  the 
plan  shall  be  in  operation,  and  its  working  effect  ascertained." 


THE  IRISH  BANKS.  -  ADDENDUM 


(.From,  the  London  BanJrtrt' 

mm                E 

I.  BuikoflrcVtnd,         .... 

Almanac,  Diary,  and  Year  Book,  for  1861.) 

Paid-up      Rfttrred          Fixed      No.  of 
'ttaUiihtd.        Capital.        Fund.            Inut.   BrancM. 

1783            3,000.000       1,093,300        3,7:in.428           24 
M0                126.0(0             ....                   r,n           20 

!-•.-.                2VHNK)           68,000         Nnlaxue             3 
450,000           60,106           761,767           48 

1838                          ....                      ....                    I',.;   1V5H 

•  «                                                                                                                                     v  J    I  i-vl 

IM              180,000          4iM:9          ai    ;:  < 
l-i'.                 640,000          110,182            927,667            38 
309,176          45,746        No  IMUO        Nona 
8 
1838                200,000              ....            311,070           14 

X.  BtUut  Blinking  Compuijr,    . 
a  Hibcnttn  Bank,  Dublin.   . 
4    Na'.looal  Bulk  of  IraUod,      . 

ft.     IK       do.        GaomA, 
&      Do.       do.        &rrick-<io-Puir. 
7.  Northern  Bwtklaf  Company,  Belfast, 
a  Piorineul  Bank,        .... 
«.  ««r«l  Bmnk  oflrrUnd,  .        .        . 
10.  TippM»rv  Joint  Stock  Bank,     . 
II.  UUUr  Banking  Company,    . 

Omerml  Circulation. 


'      •        '     •  •    ' 
,••  ..     •  •    • 

!          - 

4.  Irtek  Banlu,    . 
fc  UEMCO  Ba*k«,     . 


Dee.  4,  1947.         Dte.  2,  18J8. 


401 


3S6 


Dee.  l,lSt9.        Nov.  2,  1850. 

19,787,000 

t  '«•( 

3,31d,000 


fi.nnn 
i»j 


Moral  and  Religious  Duties 


SECTION  VIII.  —  THE    MORAL   AND    RELIGIOUS    DUTIES 
OF    BANKING   COMPANIES.* 


"  I  implore  the  blessing  of  Divine  Providence  on  our  united  efforts  to  encourage  the  industry  and  in- 
crease the  comforts  of  my  people,  and  to  inculcate  those  Religious  and  Moral  Principles  which  are  the 
surest  foundation  of  our  security  and  happiness."  —  SPEECH  FROM  TUB  THRONE,  Aug.  9,  1845. 

"  Property  has  its  Duties  as  well  as  its  Rights."  —  THE  LATE  MB.  DRUMMOND. 


THIS  is  the  age  of  public  companies.  The  principle  of  association  is 
one  of  the  most  powerful  agents  of  modern  times.  Whatever  object  we 
wish  to  accomplish,  whether  political  or  commercial,  literary  or  religious, 
the  first  step  is  to  form  a  society.  Those  joint-stock  associations  that 
involve  the  outlay  of  capital  with  a  view  to  profit,  are  called  public  com- 
panies ;  and  these  form  the  subject  of  our  present  inquiries. 

Public  companies  now  occupy  a  distinguished  place  in  our  social  econo- 
my. We  receive  our  education  in  schools  and' colleges  founded  by  public 
companies.  We  commence  active  life  by  opening  an  account  with  a 
banking  company.  We  insure  our  lives  and  our  property  with  an  insur- 
ance company.  We  avail  ourselves  of  docks,  and  harbours,  and  bridges, 
and  canals,  constructed  by  public  companies.  One  company  paves  our 
streets,  another  supplies  us  with  water,  and  a  third  enlightens  us  with  gas. 
At  home,  numerous  luxuries  are  brought  within  our  reach  by  different 
companies.  And  if  we  wish  to  travel,  there  are  railway  companies, 
and  steamboat  companies,  and  navigation  companies,  ready  to  whirl  us 
to  every  part  of  the  earth.  And  when,  after  all  this  turmoil,  we  arrive 
at  our  journey's  end,  cemetery  companies  wait  to  receive  our  remains, 
and  take  charge  of  our  bones. 

The  question  that  now  claims  our  attention  is,  whether  these  powerful 
companies  ought  to  be  regarded  as  moral  agents  ?  that  is,  whether  they 
are  capable  of  virtuous  and  vicious  actions,  and,  like  individuals,  are  re- 
sponsible to  a  Superior  Power,  who  will  reward  or  punish  them  according 
to  their  works. 

In  examining  this  question,  we  shall  propose  the  following  inquiries :  — 

First.  Ought  public  companies,  like  individuals,  to  be  regarded  as 
moral  agents,  and  therefore  bound  to  perform  moral  and  religious  duties  ? 

Second.  What  are  those  moral  and  religious  duties  which,  as  moral 
agents,  public  companies  are  bound  to  perform  ? 

*  This  section  was  printed  separately  in  the  beginning  of  the  year  1846,  under  the 
title  of  "  The  Moral  and  Religious  Duties  of  Public  Companies."  It  was  designed 
only  "  for  private  distribution  among  such  of  the  writer's  friends  as  were  in  a  position 
to  influence  the  conduct  of  public  companies."  The  favorable  opinion  of  it  expressed 
by  some  of  those  friends,  ha«  induced  me  to  publish  it  as  a  portion  of  the  present 
work. 

387 


A  Treatise  on  Banting. 

Third.  What  are  those  rewards  or  punishments  which  may  be  ex* 
pected  to  follow  the  performance  or  non-performance  of  those  duties? 

FIRST.  We  inquire,  ought  public  companies,  like  individuals,  to  be 
regarded  as  moral  agents,  and  therefore  bound  to  perform  moral  and  n •- 
ligious  duties  ? 

We  assume,  at  the  commencement  of  our  inquiries,  thru  mankind,  as 
intiiriduals,  are  moral  agents,  having  had  laws  laid  down  for  their  gov- 
ernment by  a  Superior  Being,  to  whom  they  are  responsible  for  their  ac- 
tions. They  who  deny  this  proposition  (if  such  there  be)  are  not  the 
persons  for  whose  perusal  these  pages  are  designed  ;  and  therefore  we 
will  not  ask  them  to  accompany  us  any  farther  in  our  inquiries. 

Assuming  thnt  mankind  are  responsible,  ns  individuals,  wr  propose  to 
inquire  whether  public  bodies,  as  such,  are  subject  to  the  same  responsi- 
bility. And  here  we  would  suggest  the  following  considerations  :  — 

1  Public  companies  are  recognized  as  moral  agents  by  the  laws  of 
the  country  in  which  they  are  established. 

Public  companies  have,  by  law,  the  same  rights  OR  individuals ;  their 
property  is  protected  by  the  same  laws  as  that  of  individuals.  Theft  or 
fraud  towards  them  is  attended  with  the  same  punishment.  They  can 
sue  and  be  sued  in  the  same  courts  of  justice.  The  military  and  naval 
forces  protect  them  from  external  violence.  They  have  the  same  com- 
mercial privileges,  and  can  buy  and  sell  and  get  gain.  The  impro\e- 
ments  in  the  arts  and  sciences  benefit  them  as  well  as  individuals;  and 
whatever  new  laws  are  passed  by  the  Legislature  confer  upon  them  the 
same  benefits  as  upon  individual  citizens.  Having  the  same  rights,  they 
have  necessarily  the  same  duties  as  individuals.  Equality  of  privilege 
implies  equality/of  moral  obligation.  Property  has  its  duties  as  well  as 
its  rights  ;  and  if  the  property  which  to-day  is  in  the  hands  of  an  indi- 
vidual is  transferred  to-morrow  into  the  possession  of  a  thousand  indi- 
viduals, would  it  not  carry  with  it  the  same  amount  of  moral  obligation  ? 
Would  not  the  possession  of  the  property  demand  from  the  company  the 
same  duties  towards  their  servants,  their  fellow-citizens,  their  country, 
and  their  God,  which  it  previously  demanded  from  the  individual  ?  and 
would  they  not  be  equally  bound  to  the  exercise  of  justice,  kindness,  be- 
nevolence,  and  patriotism  ?  The  success  of  public  companies  is  ofien  at 
the  expense  of  individuals.  Ought  they  not,  then,  to  be  called  upon  to 
perform  the  social  duties  of  the  classes  they  have  annihilated  ?  On  these 
principles  the  legislatures  of  all  countries  have  imposed  on  public  com- 
panies the  same  duties  as  on  individuals;  and  in  case  of  violations  of 
its  laws,  have  rendered  them  subject  to  the  same  penalties.  They  have 
thus  been  recognized  as  moral  agents. 

Public  companies  are  capable  of  sustaining  many  social  relations 
which  are  the  foundation  of  moral  duties. 

The  social  relations  of  public  companies  are  various.  They  may  be 
buyers  or  sellers,  debtors  or  creditors  ;  they  may  employ  others,  or  be 
employed  themselves ;  they  may  be  receivers  or  bestowers  of  favor ;  they 
may  be  friends  or  enemies,  neighbours  or  strangers ;  they  may  be  wealthy 
or  indigent,  in  prosperity  or  adversity ;  they  may  be  influential  or  other- 
wise; they  may  be  plaintiffs  or  defendants  in  a  court  of  law,  or  be  the 


Moral  and  Religions  Duties. 

accusing  or  the  accused  party  in  a  criminal  court.  Every  relationship 
implies  a  corresponding  duty  ;  and  we  contend  that  public  companies,  in 
any  of  these  relative  positions,  are  bound  to  perform  the  same  duties 
which  the  same  relations  would  impose  upon  individuals. 

If  it  were  necessary  to  quote  Scripture,  to  show  that  relation  implies  cor- 
responding  duties,  we  might  multiply  quotations,  —  a  few  will  suffice  :  — t- 

"  Have  we  not  all  one  father  7  Hath  not  one  God  created  us  ?  Why  do  we  deal 
treacherously  every  man  against  his  brother? "  Mai.  ii.  10. 

"  A  son  honoreth  his  father,  and  a  servant  his  master :  if,  then,  I  be  a  father,  where 
is  mine  honor  7  And  if  I  be  a  master,  where  is  my  fear  1  "t  Mai.  i.  6. 

"It  is  not  for  kings  to  drink  wine,  nor  princes  strong  drink."    Prov.  xxxi.  4. 

"  It  was  not  an  enemy  that  reproached  me ;  then  I  could  have  borne  it :  but  it  was 
thou,  a  man  mine  equal,  my  guide,  and  my  acquaintance."  Ps.  Iv.  12, 13. 

"  Thou  shall  neither  vex  a  stranger,  nor  oppress  him :  for  ye  were  strangers  in  the 
land  of  Egypt."  Exod.  xxii.  21. 

"  Am  I  a  Jew  7     Thine  own  nation  have  delivered  thee  nnto  me."    John  xviii.  35. 

"  Ye  call  me  Master  and  Lord :  and  ye  say  well ;  for  so  I  am.  If  I,  then,  your  Lord 
and  Master,  have  washed  your  feet ;  ye"  also  ought  to  wash  one  another's  feet."  John 
xiii.  13,  14. 

"  There  was  a  certain  creditor  which  had  two  debtors :  the  one  owed  five  hundred 
pence,  and  the  other  fifty.  And  when  they  had  nothing  to  pay,  he  frankly  forgave 
them  both.  Tell  me,  therefore,  which  of  them  will  love  him  most."  Luke  vii.  41,  42. 

"  Shouldst  not  thou  also  have  had  compassion  on  thy  fellow-servant,  even  as  I  had 
pity  on  thee  7  "  Matt,  xviii.  33. 

"  Which  now  of  these  three,  thinkest  thou,  was  neighbour  to  him  that  fell  among 
thieves  7  And  he  said,  He  that  showed  mercy  on  him."  Luke  x.  36. 

"  Love  as  brethren."      1  Pet.  iii.  8. 

"  Sittest  thou  to  judge  me  after  the  law,  and  commandest  me  to  be  smitten  contrary 
to  the  law  ?  "  Acts  xxiii.  3. 

"  What  hast  thou  that  thou  didst  not  receive  7  now  if  thou  didst  receive  it,  why  dost 
thou  glory,  as  if  thou  hadst  not  received  it  7  "  1  Cor.  iv.  7. 

"If  any  man  see  thee  which  hast  knowledge  sit  at  meat  in  an  idol's  temple,  shall  not 
the  conscience  of  him  which  is  weak  be  emboldened  to  eat  those  things  which  are 
offered  to  idols ;  and  through  thy  knowledge  shall  the  weak  brother  perish  7  "  1  Cor. 
viii.  10,  11. 

"  Art  thou  a  Master  of  Israel,  and  knowest  not  these  things  7  "    John  iii.  10. 

"  Thou  that  teachest  another,  teachest  not  thou  thyself  7  "    Rom.  ii.  21. 

"  If  thou,  being  a  Jew,  livest  after  the  manner  of  the  Gentiles,  and  not  as  do  the 
Jews,  why  compellest  thou  the  Gentiles  to  live  as  do  the  Jews  7 "  Gal.  ii.  14. 

All  these  quotations  refer  to  certain  relations,  and  intimate  certain 
duties.  They  serve  to  prove  the  general  principle,  that  every  relation 
implies  a  corresponding  duty  ;  and  hence  we  infer,  that  so  far  as  public 
companies  are  capable  of  sustaining  the  same  relations,  they  are  bound 
to  the  performance  of  the  same  duties. 

3.  Public  companies  sustain  those  relations  to  the  Deity  which  imply 
an  obligation  to  the  performance  of  moral  and  religious  duties. 

We  have  considered  public  companies  in  their  relation  to  the  com- 
munity in  which  they  are  established  ;  in  relations  they  may  sustain  to  in- 
dividual members  of  that  or  any  other  community  ;  we  shall  now  consider 
them  in  their  relation  to  the  Deity.  This  forms  the  chief  ground  of 
moral  and  religious  duty.  Their  relation  to  the  Deity  is  a  relation  of 
dependence.  It  will  not  be  denied  that  for  every  talent  necessary  to 
conduct  their  operations,  and  for  all  the  success  which  may  attend  their 
exertions,  public  bodies  are  as  dependent  as  individuals  upon  the  kindness 
of  Providence.  Every  good  and  every  perfect  gift  cometh  down  from 
GG  *  389 


A   Treatise  on  Banking. 

the  Father  of  Light.  (James  i.  17.)     Thei.  tu  tin-  Deity  is  also 

n  relation  of  obhgu     a.     They  have  ;  IMTS;  as  rec 

IN  it  is  their  duty  to  l>e  grateful,  and  this  duly  is  the  more  obligatory 
n   pr. .portion  to  the  greatness  and  MQjMOMMkNl  »i  'i.' 

r    ivl.-iiinn   to  the   Deity   is  aluo  a   relation  of   responsibility.       I 
possess  wrallh,  inf!  -T.    Providence  never  bestows  th«->--  fell  ir  . 

without  holding  the  parties  on  whom  they  are  l>< —o\srd   rwpootiblfl 
their  proper  use.    Those  who  duly  improve  tin-  talents  with  which  Provi- 
dence has  intrusted   them,  \\.ii   have  those   talents  increased,  and   he   n - 
warded  by  the  Divine  approbation.     Those  who  neglect  to  use  these  tal- 
responsible  lor  their  neglect,  and  wiil  he   punished  for  their 
•  •activity.   (Luke    \  .''>.)       \Ve    liave    no   reason   to   suppose    that 

public  companies  are  excluded  from  the  general  rules  of  the  Divii:- 
ministration.     As  far,  then,  as  they  art-  endowed  with  the  same  !,-. 
as  individuals,  so  far  must  they    he  considered  as  subject  to  the  same 
raaponsih  i'rom  these  considerations  we   infer,  that   public  com- 

panies, like  individuals,  are  moral  agents. 

I.  1' u blic  companies  are  analogous  to  other  collective  bodies  who  are 
acknowledged  to  be  moral  ag< 

It  will  not  be  denied  that  n  notion  may  declare  an  unjust  war,  may 

y  it  on  in  u  mid  manner,  may  treat  a  corupiered  nation  with  njtpres- 

treaty  of  peace  with  diijilirih/  and  fniml.     Nor 

will  it  be  denied,  that  a  nation  may  become  immoral  by  the  extinction  of 
moral  fueling  in  its  rulers,  and  throughout  the  population. 

If,  then,  nations  are  capable  of  performing  virtuous  or  vicious  actions, 
(hen  are  tb£y  moral  agents;  to  be  rewarded  or  punished  according  to 
their  actions.  The  doctrine  of  national  responsibility  is  thus  stated  by 
Moses  :  — 

-  If  ye  will  walk  in  my  statute*,  and  keep  my  commandments,  and  do  them ;  then  I 
will  give  yon  rain  in  due  season,  and  the  land  shall  yield  her  increase,  and  the  tree*  of 
the  field  shall  yield  their  fruits,  and  your  threshing  .-hall  reach  unto  tli«>  vintage,  and 
the  vintage  shall  reach  unto  the  sowing  time  :  and  y  .-hall  eat  your  bread  to  the  full. 
and  dwell  in  your  land  safely.  And  I  will  pve  peace  in  the  land,  and  ye  .-hull  lie 
down,  and  none  shall  make  you  afraid;  and  I  will  rid  evil  beasts  out  of  the  Innd, 
neither  shall  the  sword  po  through  your  land.  And  ye  shall  chase  your  enemies,  and 
ther  •hall  fall  before  you  hv  the  sword.  And  I  will  set  my  talienuicle  among  you,  and 
will  be  your  God,  and  ye  snallU  my  jiroj.le. '  Ix-v  xxvi.  3-12. 

"But  if  ye  will  not  hearken  unto  me,  and  will  not  do  all  these  commandments,  I 
also  will  do  this  unto  you;  I  will  appoint  over  you  terror,  consumption,  and  the  hurn- 
inn  ague,  that  shall  consume  the  eyes,  and  cause  sorrow  of  heart :  and  ye  slut!! 
your  seed  in  Tain,  for  your  enemies  shall  cat  it;  and  1  will  set  my  face  acaiuM  you, 
ind  ye  shall  be  slain  ool   !••  your  nuinir*;  they  that  hate  you  shall  rei^n 
and  ye  shall  flee  when  none  plirM1' '''  V"      And  if  ye  will  not  \.-t  for  nil  this  )><  i 

.  •-•>::[  p-inMi  you  seven  times  more  for  your  sins."     Lev.  xxvi.  U-  18; 
xxviii.  1-15;  Neh.  ix.;  Jer.  r.  23-28:  yii.  5-7;  xviii.  7-10;  xxii.  i; 
xxii. ;  Mao.  xxiii.  34  -  38. 

The  Jewish  history  presents  the  most  remarkable  instance  on  record  of 
a  nation  being  rewarded  for  their  righteousness  and  punished  for  their  dis- 
M00.     '!        i.ations  they  con'j-H  red  were  subjected  to  the  same  dis- 
cipline, and  it  w  expressly  stated  that  those  nations  were  punished  for 
'their  sins.     And  those  who  have  s'udi'.-d  the  philosophy  of  history  will 


Moral  and  Religious  Duties. 

have  observed,  that  nations  have  risen  and  fallen  in  political  greatness  as 
they  have  risen  and  fallen  in  their  observance  of  the  principles  of  mo- 
rality and  religion. 

On  this  subject  we  might  quote  the  language  of  historians,  of  moralists, 
of  philosophers,  and  of  theologians  ;  but  we  prefer  citing  the  language  of 
a  monarch,  especially  as  that  monarch  is  our  own.  Surrounded  by  her 
nobles,  her  senators,  her  councillors,  her  judges,  her  generals,  and  her 
admirals,  —  Queen  Victoria  has  declared  from  the  throne,  "  RELIGIOUS 

AND  MORAL  PRINCIPLES  ARE  THE  SUREST  FOUNDATION  OF  OUR  SECURITY 
AND  HAPPINESS." 

As,  then,  large  bodies  of  men,  like  nations,  are  rewarded  or  punished 
in  their  collective  capacity,  for  their  virtuous  or  vicious  actions,  it  would 
seem  to  follow,  that  smaller  bodies  of  men,  like  public  companies,  may 
be  subjected  to  the  same  moral  discipline. 

A  public  company,  like  a  nation,  is  composed  of  a  number  of  individ- 
uals who  have  a  government  for  the  regulation  of  their  affairs,  and  whose 
acts  are  considered  as  the  acts  of  the  whole  body.  It  is  true  that  a  pub- 
lic company  is  composed  of  a  smaller  number  of  persons  than  a  nation," 
but  that  cannot  affect  the  moral  character  of  its  actions.  It  is  also  true, 
that  while  a  nation  must  always  act  through  its  government,  a  public 
company  may,  and  often  does,  at  the  general  meeting  of  its  shareholders, 
act  independently  of  its  government ;  but  neither  can  this  alter  its  moral 
agency ;  for  whether  the  form  of  government  be  aristocratical  or  democrat- 
ical,  the  duties  of  a  nation,  or  of  a  public  company,  remain  the  same.* 

In  opposition  to  this  doctrine,  it  may  be  contended  that,  to  render  public 
bodies  of  men  responsible  in  their  collective  capacity,  would  be  destruc- 
tive of  personal  or  individual  responsibility.  But  this  is  not  the  case.  A 
nation  may  be  punished  for  its  national  crimes,  and  yet  the  individual 
who  may  have  caused  these  crimes  may  sustain  an  individual  punishment. 
Thus  Jeroboam,  Ahab,  and  other  kings  of  Israel,  were  individually  pun- 
ished, while,  at  the  same  time,  the  nation  was  also  punished  in  its  collec- 
tive capacity.  So  a  public  company  may  be  punished  or  rewarded  for  its 
actions,  while,  at  the  same  time,  any  individual  who  caused  these  actions 
may  also  be  personally  rewarded  or  punished.  It  may,  too,  be  objected, 
that  if  a  public  company  is  to  be  punished  as  such  for  its  acts,  Ujen  all  the 
partners  would  share  in  the  punishment,  though  many  of  them  may  have 
been  quite  innocent  of  the  crime.  To  this  we  answer,  that  the  same  ob- 
jection would  apply  to  the  doctrine  of  national  responsibility.!  It  is  not 

*  In  this  discussion  we  consider  public  companies  as  corporations,  and  inquire  \vhat 
duties  they,  as  corporations,  owe  to  other  parties.  The  several  duties  of  directors, 
officers,  and  shareholders,  do  not  lie  within  the  range  of  our  inquiries. 

t  The  logical  reader  need  not  be  reminded,  that  in  arguments  from  analogy  it  is  a 
sufficient  answer  to  an  objection  to  show  that  the  objection  applies  with  equal  force  to 
the  doctrine  from  which  the  analogy  is  drawn.  Thus,  in  the  text,  the  monil  responsi- 
bility of  nations  is  assumed  as  admitted  by  all  parties,  and  therefore  requiring  no  fur- 
ther proof.  From  the  resemblance  or  analogy  between  the  two  cases,  we  infer  the 
moral  responsibility  of  public  companies.  It  is  therefore  a  suliicicnt  answer  to  any 
objection  iigaiii-it  the  latter  doctrine,  to  show  that  it  will  equally  :i;>ply  to  the  former. 
Indeed,  the  more  numerous  the  objections,  if  they  will  apply  cqu.illy  in  b;>th  cases,  tho 
more  the  argument  is  strengthened  ;  as  they  are  confirmatory  of  the  soundness  of  the 
analogy. 

391 


A  Trtatite  on  Banking. 

ponible  in  fhe^caae  of  a  largo  body  of  men  f»r  ••MTV  in-lividual  to  take 
part  in  its  actions.  The  act  of  tho  authori/ed  L">\'  rnmcnt,  or  of  tho 
majority  of  the  members,  must  be  regarded  a>  tin  act  .it  tin-  whole  com- 
munity, nml  every  individual  must  share  in  the  prosjKjrity  or  advt  IMU  n  - 
suiting  from  such  acts. 

It  may  further  be  observed,  that  it  is  not  inconsistent  with  the  principles 
of  the  Divine  government  for  persons  to  suffer  for  the  wicki dm-ss,  «,r  i«. 
bo  rewarded  for  the  righteousness,  of  those  with  whom  they  arc  social  1\ 
connected:  — 

the  Lord  thy  God  am  a  jealous  God,  visiting  the  iniquity  of  the  father*  upon  the 
children  unto  the  third  and  fourth  generation  of  them  that  hate  me ;  ami  s).< 
merry  onto  thousand*  of  them  that  lore  me,  and  keep  my  commandments."     1 
xx.  5,  6. 

In  our  own  day,  we  witness  numerous  instances  of  children  possessing 
wealth,  mental  cultivation,  and  influence  in  society  through  the  virtu- 
their  parents.  And  also,  not  a  few  cases  of  children  being  reduced  to 
poverty  and  degradation  through  the  vices  of  their  parents.  Children 
suffer  through  the  conduct  of  tin  ir  parents,  and  parents  through  the  con- 
duct of  their  children;  masters  by  their  servants,  and  sen-ants  by  their 
masters.  In  fact,  it  is  not  possible  for  any  individual,  however  obscure,  to 
be  either  virtuous  or  vicious  without  in  some  way  promoting  the  happiness 
or  misery  of  some  person  besides  himself.  It  Is,  therefore,  no  valid  ob- 
jection to  the  doctrine  of  the  moral  responsibility  of  public  comp;uii<  s 
that  it  renders  all  the  partners  answerable  for  the  conduct  of  the  majority. 
In  fact,  .human  governments  act  upon  this  principle.  If  any  company 
were  tC  incur  penalties  to  the  state,  those  penalties  would  be  enforced 
agaiast  the  whole  property  of  the  company,  though  many  individual  part- 
ners might  be  quite  unconscious  of  the  offence  by  which  those  penalties 
were  incurred. 

We  might  further  confirm  our  doctrine  by  tracing  the  analogy  between 
public  companies  and  families. 

"  Ponr  oat  Thy  fnrr  upon  the  familifs  that  call  not  on  Thy  name."    .7-  r  x.  L'.'>. 
"In  that  day  I  wilf  perform  against  Eli  all  tilings  I  have  spoken  cowerning  hit 
;  for  I  hare  told  him  that  I  will  judge  his  house  for  ever,  for  the  iniquity  \vhi<  h 


he  knoweUt;  because  his  sons  made  themselves  vile  and  i.  i  them  not.    And 

therefore  I  Bare  sworn  unto  the  house  of  Kli.  that  the  iniquity  of  Kli's  house  shall  not 
be  purged  with  sacrifice  nor  offering  for  ever.'1     1  Ham.  iii    la-  14. 

"And  the  ark  of  the  Lord  continued  in  the  house  of  Obcd-edom  the  Giitit. 
month* :  and  the  Lord  blessed  Olx-d-edom.  and  all  his  household;  and  it  was  told 
King  David,  saying,  The  Lord  hath  blessed  the  house  of  Obed-edom  and  all  th;i: 
taineth  onto  him.  because  of  the  ark  of  God."     2  Sam.  \  i    11,  12 

"  And  Jeremiah  said  unto  the  house  of  the  Kcrlmhites,  Thus  saith  the  Lord  of  Hosts, 
die  God  of  Israel;  Because  ye  h:i  the  commandment  of  .lona-iiih  \our  fa- 

ther, and  kept  all  hit  jin-i-q"t».  and  done  according  to  all  that  he  hath  commanded 
TOO:  therefore  thus  saith  the  I-'.ri  '  -od  of  Israel;  .Jon.idal..  the  son  «>t 

bechab,  shall  not  want  a  man  to  stand  before  me  for  ever."     Jer.  xxxr.  18,  19. 

We  might  adduce  other  declarations  respecting  the  families  of  I 
Jeroboam,  Ahab,  and  others.     It  may  be  objected,  that  in  \\v-w  cases  tin- 
families  were  rewarded  or  punished  for  the  acts  of  the  head  of  the  fami- 
ly, and  not  for  their  own.     It  appears,  however,  that  tho  families  con- 
curred in  the  actions  of  their  head.     When  this  was  not  the  case,  the 

HI 


Moral  and  Religious  Duties. 

exception  is  mentioned  (1  Kings  xiv.  13),  and  in  others  it  is  expressly 
stated  that  the  reward  or  punishment  of  the  family  would  in  some  degree 
depend  upon  their  own  conduct  (Ps.  Ixxxix.  30-33). 

The  doctrine  of  collective  responsibility  in  the  present  world  might  be 
still  further  confirmed  by  references  to  the  punishments  inflicted  on  partic- 
ular cities.  We  will  refer  only  to  Nineveh  and  Jerusalem.  In  the  former 
case  an  act  of  general  humiliation  obtained  a  remission,  or  at  least  a 
postponement,  of  the  punishment  due  to  their  wickedness ;  and  in  the 
latter,  their  sin  in  rejecting  the  Gospel  was  visited  with  a  signal  punish- 
ment. 

"  The  word  of  the  Lord  came  unto  Jonah,  saying,  Arise,  go  to  Nineveh,  that  great 

city,  and  cry  against  it ;  for  their  wickedness  is  come  up  before  me And  he  cried 

and  said,  Yet  forty  days,  and  Nineveh  shall  be  overthrown.  So  the  people  of  Nine- 
veh believed  God,  and  proclaimed  a  fast,  and  put  on  sackcloth,  from  the  greatest  of 
them  even  to  the  least  of  them.  For  word  came  unto  the  king  of  Nineveh,  and  he 
arose  from  his  throne,  and  he  laid  his  robe  from  him,  and  covered  him  with  sackcloth, 
and  sat  in  ashes.  And  he  caused  it  to  be  proclaimed  and  published  through  Nineveh 
by  the  decree  of  the  king  and  his  nobles,  saying,  Let  neither  man  nor  beast,  herd  nor 
flock,  taste  any  thing:  let  them  not  feed,  nor  drink  water :  but  let  man  and  beast  be 
covered  with  sackcloth,  and  cry  mightly  unto  God:  yea,  let  them  turn  every  one  from 
his  evil  way,  and  from  the  violence  that  is  in  their  hands.  Who  can  tell  if  God  will 
turn  and  repent,  and  turn  away  from  his  fierce  anger,  that  we  perish  not  ?  And  God 
saw  their  works,  that  they  turned  from  their  evil  way ;  and  God  repented  of  the  evil 
that  he  had  said  that  he  would  do  unto  them ;  and  he  did  it  not."  Jonah  i.  2 ;  iii.  4  -  10. 

"  And  when  he  was  come  near,  he  beheld  the  city,  and  wept  over  it,  saying,  If  thou 
hadst  known,  even  thou,  at  least  in  this  thy  day,  the  things  which  belong  unto  thy 
peace !  but  now  they  are  hid  from  thine  eyes.  For  the  days  shall  come  upon  thee 
that  thine  enemies  shall  cut  a  trench  about  thee,  and  compass  thee  round,  and  keep 
thee  in  on  every  side,  and  shall  lay  thee  even  with  the  ground,  and  thy  children  within 
thee ;  and  they  shall  not  leave  in  thee  one  stone  upon  another ;  because  thou  knewest 
not  the  time  of  thy  visitation."  Luke  xix.  41  -44 ;  Matt,  xxiii.  37,  38. 

Before  quitting  this  branch  of  our  inquiry,  we  may  notice  one  practical 
application  of  the  doctrine  of  collective  responsibility.  It  is,  that  every 
individual  member  of  a  public  body,  whether  a  nation,  a  family,  or  a  com- 
pany, should  induce  that  body  to  walk  in  the  path  of  uprightness.  For 
should  they  not  do  so,  he  will  have  to  bear  a  portion  of  the  collective 
punishment,  though  he  may  not  personally  have  taken  any  active  part  in 
the  crime  (Matt.  xxiv.  19). 

SECONDLY.  —  Having  shown  that  public  companies  are  moral  agents, 
and  consequently  bound  to  the  performances  of  certain  duties,  we  shall 
now  inquire  what  are  those  duties  which,  as  moral  agents,  public  compa- 
nies are  bound  to  perform. 

We  shall  not  attempt  to  enumerate  all  these  duties,  but  merely  make  a 
selection  of  the  most  important,  and  these  we  shall  classify  as,  I.  The 
duties  of  patriotism ;  II.  The  duties  of  social  relationship ;  III.  The  du- 
ties of  religion ;  IV.  The  duties  of  benevolence. 

I.  The  duties  of  patriotism. 

By  the  duties  of  patriotism  we  mean  those  duties  which  a  public  com- 
pany owes  to  the  state.  Patriotism  is  the  love  of  one's  country,  or,  more 
properly,  the  love  of  one's  nation.  Public  spirit  is  a  willingness  to  sacri- 
fice a  portion  of  one's  time,  property,  or  comfort,  to  promote  the  happiness 

393 


A  Treatise  on  Banking. 

of  one's  fellow-citizen*.  These  are  duties  obligatory  on  every  citizen 
(Ps.  cxxxvii.  ;  Neh.  i.  4  ;  ii.  .'I  ;  K»m.  i.\.  :i),  and  consequently  binding  on 
.••  body  of  citizens.  \\  '••  repudiate  the  doctrine  that  a  piih- 
lic  company  has  only  to  attend  to  the  interest  of  its  proprietors,  regardless 
of  the  effect  its  measures  may  have  on  tbe  public  weal.  This  would  he 
a  violation  of  duty  on  the  port  of  an  individual,  and  still  mop-  so  on  tl.-- 
part  of  a  public  company.  For  thry  have  received  fro  in  tin-  Legislature 
special  privileges  to  enable  them  to  carry  on  their  operations.  '!!...• 
••ges  have  been  granted  with  a  view  to  the  promotion  of  the  public 
interest.  If,  then,  these  privileges  are  employed  to  the  injury  of  the 
public,  then  is  there  not  merely  a  violation  of  the  duty  of  citizenship, 
but  n  further  violation  of  duty  by  the  misapplication  of  privileges  con- 
ferred by  the  Legislature. 

I'nto  whomsoever  much  i<  jjivm.  of  him  shall  much  t>c  required;  nnd  to  whom 
men  have  committed  much,  of  him  they  will  ask  the  more.'1     Luke  xii.  48. 

In  proportion  as  the  Legislature  has  conferred  privileges,  in  such  pro- 
portion it  may  be  expected  that  they  who  have  received  these  priv: 
will  be  active  in  promoting  the  public  interest.     The  possession  of  privi- 
leges implies  an  increased  obligation  to  perform  certain  duties. 

Tlii-  first  of  these  duties  is  to  obey  the  laws.  A  public  company  should 
abstain  from  smuggling  and  all  other  illicit  proceedings,  should  make  cor- 
rect  returns  to  government,  and  pay  its  fuir  proportion  of  the  property- 
tax  and  of  all  other  duties, 


unto  Csssar  the  thing*  which  are  OJEHJU-'S.  I\<-n<l<-r  to  nil  tli.-ir  dues  ; 
tribute,  to  whom  tribute  is  due;  custom,  to  whom  custom  ;  iVur,  to  whom  fcur;  honor, 
to  whom  honor."  Horn.  xiii.  7. 

Another  duty  is  to  enforce  the  laws  upon  others.  Individuals  some- 
times abstain  from  prosecuting  frauds  upon  themselves,  from  a  misap- 
plied feeling  of  compassion,  an  unwillingness  to  incur  odium,  or  the 
of  expense  ;  but  none  of  these  feelings  are  sufficient  to  justify  a  public 
company  in  abstaining  from  this  duty.  Such  a  course;  is  injurious  to  the 
public,  by  holding  out  inducements  to  the  commission  of  similar  crimes. 

'•Became  sentence  against  an  evil  work  is  not  executed  speedily,  therefore  the 
heart  of  the  sons  of  men  is  fully  set  in  them  to  do  evil.''  :  1  1  . 

It  is  also  the  duty  of  public  companies  to  support  the  cause  of  order 
and  of  due  submission  to  constituted  authorities,  the   righ's  of  pmi 
the  supremacy  of  the  law,  the  impartial  administration  of  puhlic  justice, 
and  to  honor  the  constitutional  government  of  the  country,  by  whatever 
party  it  may  be  administered. 

"Pot  them  in  mind  to  be  subject  to  principalities  and  powers,  to  obey  magistrates, 
to  be  ready  to  erery  good  work,  to  spcnk  «-vil  of  no  man,  to  be  no  brawlers,  but  gentle, 
showing  all  meekne**  onto  all  men."  Tit  iii.  1.  :>. 

Another  duty  is  to  conduct  the  affairs  of  the  company  on  such  a  liberal, 
yet  prudent  scale  of  expense,  as  shall  afford  encouragement  to  the  indus- 
try, trade,  and  fine  arts  of  the  country.  Solomon  says,  — 

"  Prepare  thy  work  without,  and  make  it  fit  for  thyself  in  the  field,  and  afterwards 
build  thy  bouse,"  I'rov.  xxiv.  27. 


Moral  and  Religious  Duties. 

Which  means,  if  we  understand  it  rightly,  "  Get  your  money  before  you 
spend  it ;  but  having  got  it,  live  in  a  scale  of  expense  corresponding  to 
your  means ;  afterwards  build  thy  house."  Individuals  may  be  justified 
in  living  much  within  their  means,  in  order  to  provide  for  old  age,  or  for 
the  proper  settlement  of  their  children  ;  but  public  companies  cannot  have 
such  motives  for  conducting  their  establishments  with  an  unsuitable  econ- 
omy. But,  above  all,  it  is  the  duty  of  a  public  company  to  maintain,  in 
all  its  transactions,  a  high-toned  morality. 

"  Righteousness  exalteth  a  nation."     Prov.  xiv.  34. 

A  departure  from  moral  rectitude  is  altogether  inexcusable  in  a  public 
company.  As  all  their  actions  are  presumed  to  be  the  result  of  previous 
deliberations,  they  cannot  plead  in  excuse,  as  individuals  do,  the  power  of 
passion,  the  impulse  of  the  moment,  or  the  force  of  habit.  In  proportion 
to  the  weakness  or  the  absence  of  temptation,  in  such  proportion  would 
their  conduct  be  the  more  criminal  (Prov.  vi.  30) ;  while  their  wealth  and 
influence  would  render  their  example  more  extensively  injurious  to  the 
public  morality.  If  parties  of  high  station  in  society  depart  from  the 
strict  rule  of  duty,  those  of  inferior  station  will  deviate  still  more  widely 

"  If  a  ruler  hearken  to  lies,  all  his  servants  are  wicked."    Prov.  xxix.  12. 

II.  The  duties  of  social  relationship. 

The  social  duties  of  public  companies  are  the  same  as  those  of  individ- 
uals who  maintain  the  same  relations.  These  duties  are  clearly  stated  in 
the  Holy  Scriptures.  The  Bible  is  a  code  of  laws,  —  not  a  book  of  ad- 
judged cases.  It  lays  down  the  principles  of  human  actions,  but  leaves 
the  application  of  these  principles  to  the  dictates  of  reason  and  of  con- 
science. We  might  read  through  the  Bible,  and  not  find  a  chapter  headed 
"  The  Duties  of  Public  Companies."  In  this  case  we  endeavour  to  ascer- 
tain, in  the  fust  place,  what  are  the  duties  of  individuals.  Then  we  take 
the  principles  of  these  duties  and  apply  them  to  the  acts  of  public  com- 
panies. The  principles  of  moral  duty  undergo  no  change ;  but  the  cir- 
cumstances of  human  society  are  perpetually  changing,  and  hence  the 
correct  application  of  these  principles  is  sometimes  a  matter  of  difficulty. 
We  shall  here,  in  the  first  place,  state  in  the  language  of  Scripture  the 
principles  of  some  of  our  social  relationships,  and  then  make  a  practical 
application  of  them.  There  are,  doubtless,  other  principles  we  have  not 
mentioned,  and  those  we  have  mentioned  may  be  applied,  and  are  applied, 
in  practice,  to  many  other  cases  besides  those  specified. 

1.  These  are  the  things  that  ye  shall  do :  "  SPEAK  YE  EVERY  MAN  THE 
TRUTH  to  his  neighbour,  execute  the  judgment  of  peace  and  TRUTH  in 
your  gates,  and  let  none  of  you  imagine  evil  in  your  hearts  against  his 
neighbour,  and  love  'no  false  oath;  for  all  these  are  things  that  I  hate, 
saith  the  Lord."  Zech.  viii.  16,  17. 

Insert  no  erroneous  statements  in  your  prospectus ;  make  no  incorrect 
calculations  in  order  to  deceive  a  parliamentary  committee  ;  circulate  no 
unfounded  rumors  for  the  purpose  of  affecting  the  market  value  of  your 
shares  ;  and  let  your  annual  reports  contain  nothing  but  the  truth. 

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'  Thou  »halt  not  raise  *  false  report;  put  not  thy  hand  with  the  wicked,  to  be  an 
anriehtewu  witmM."  Exod  \\m  l 

"  The  felting  of  treason*  by  a  lying  tongue  U  a  vanity  towed  to  and  fro  of  them 
that  Mek  death."  Pror.  xxi.  6. 

2.  YK  SHALL  NOT  STEAL,  neither  DEAL  FALSELY,  neither  lie  OIU5  tO  an- 
other." i  11. 

Be  honest  and  upright  in  all  your  dealings,  let  your  ehnrges  IK-  fair  and 
just,  and  be  sincere  and  straightforward  in  all  your  pecuniary  transae- 

•  .  M, 

I'hon  shalt  not  harr  in  thy  tag  divers  weight*,  a  great  and  a  small.  Thou  shall 
not  have  in  thine  li.ni--  ilivi-r*  nn-.i-un-.,  a  ^reat  and  a  small.  But  tlmu  shalt  have  a 
perfect  and  just  weight,  n  perfect  and  just  measure  shall  thou  li:n«- :  that  thy  days 
may  be  lengthened  in  the  land  whieh  the  Lord  thy  God  givitli  thrc."  Deal.  xx'v. 

What  man  in  he  that  dcsircth  life,  niul  loveth  many  days,  that  he  may  see  good  ? 
Keep  thy  tongue  from  evil,  and  thv  lips  from  tpe*king  gOIM.  Depart  from  oil  and 
do  good ;  »e*k  peace,  and  pursue  it'"  Ps.  xxxi\.  I:!- 14  ;  l  IVt.  iii.  10,  11. 

All  promises  or  engagein.-nts  must  be  faithfully  kept,  even  when  the 
performance  is  injurious  to  the  interests  of  the  company. 

'  hat  which  is  gone  out  of  thy  lips  thou  shalt  keep  and  perform."     Dcut.  xxiii.  23. 
"  He  sweareth  to  his  own  hurt  and  i -han^eih  not."    Ps.  xv.  4. 

The  Israelites  were  punished  with  three  years  of  famine,  because  one 
«>f  their  kings  attempted  to  violate  a  treaty  into  which  they  had  been 
drawn  byfefec  representations.  Josh.  iv.  ;!,"»;  *«i  Sam.  xxi.  1. 

3.  "  If  iniquity  be  in  thv  hand,  put  it  far  away,  and  let  not  wickednea  dwell  in  thy  tal- 
rmtdet."  Job.  xi.  14. 

If  any  of  the  servants  of  a  public  company  are  found  wanting  in  integ- 
rity, they  should  immediately  be  dismissed,  and  on  no  account  be  rein- 
stated. And  if  any  of  their  professional  agents  act  dishonestly,  even  to 
benefit  the  company,  they  should  not  be  employed  again. 

"  He  that  walketh  in  a  perfect  way,  he  srmll  fcrvc  me.  He  that  worketh  deceit 
shall  not  dwell  within  my  hou<c .  In-  that  tcllcth  lies  shall  not  tarry  in  my  sight." 
Ps.  d.  6,  7. 

Banking  companies  should  not  take  the  accounts  of  disreputable  par- 
ties ;  and  a  fraudulent  bankrupt  should  not  be  allowed  to  re-open  his  ac- 
count, even  should  he  plead  that,  although  he  had  cheated  all  his  other 
creditors,  he  had  not  cheated  his  banker. 

"  Shooldit  thou  help  the  ungodly,  and  love  them  that  hate  the  Lord,  therefore  is 
wrath  upon  thcc  from  before  the  Lord."  2  Chron.  \ix.  -2. 

l>rp»rt  from  me,  ye  evil  doers,  for  I  will  keep  the  commandments  of  my  God." 
Ps.  cxix.  115. 

In  making  advances,  banking  companies  should  consider  the  moral 
character  of  the  party  with  whom  they  deal,  as  an  element  of  their  s<  <-u- 
rity ;  and  should  more  readily  afford  accommodation  to  parties  having 
nich  a  character  than  to  those  who  are  without  it.  "  The  \u<-k«-d  borrow- 
eth  and  payeth  not  again."  Ps.  xxxvii.  21. 

Public  companies  should  do  nothing  that  would  be  considered  dishonor- 
able and  disreputable  in  an  individual  member  of  the  company.  The 

3i>6 


Moral  and  Religious  Duties. 

moral  character  of  an  action  cannot  be  changed  by  the  number  of  persons 
who  may  commit  it. 

"  Though  hand  join  in  hand,  the  wicked  shall  not  go  unpunished."    Prov.  xi.  21. 
"  Fire  shall  consume  the  tabernacles  of  bribery."    Job  xv.  34. 
"  Abstain  from  every  appearance  of  evil."     1  Thess.  v.  22. 

Public  companies  should  not  listen  to  plans  and  schemes  proposed  for 
their  adoption  by  parties  known  to  be  deficient  in  moral  principle ;  nor 
should  they  hire  agents  to  do  what  they  would  not  do  themselves. 

"Evil  communications  corrupt  good  manners.  1  Cor.  xv.  33.  —  Lord,  who  shall 
abide  in  thy  tabernacle  ?  who  shall  dwell  in  thy  holy  hill  ?  He  that  walketh  uprightly, 
and  worketh  righteousness,  and  speaketh  the  truth  in  his  heart.  He  that  backbiteth  not 
with  his  tongue,  nor  doeth  evil  to  his  neighbour,  nor  taketh  up  a  reproach  against  his 
neighbour.  In  whose  eyes  a  vile  person  is  contemned  ;  but  who  honoreth  them  that 
fear  the  Lord."  Ps.  xv.  1  -4. 

4.  "  SPEAK  NOT  EVIL  ONE  OF  ANOTHER."     James  iv.  11. 

Public  companies  should  not  speak  unjustly  or  unkind  of  each  othei. 
"  Love  as  brethren."  1  Pet.  iii.  8.  But  this  does  not  prohibit  their  speak- 
ing the  TRUTH  of  each  other  on  proper  occasions,  even  when  the  truth 
may  be  unpleasant  or  injurious  to  the  party  about  whom  it  is  spoken.  It 
may  sometimes  become  the  duty  of  a  respectable  and  honorable  compa- 
ny to  expose  the  fraudulent  and  deceitful  practices  of  other  companies : 
we  are  not  forbidden  to  bear  witness  —  but  only  false  witness  —  against 
our  neighbour.  "  By  mercy  and  truth  iniquity  is  purged."  Prov.  xvi.  6. 

5.  "  Fear  thou  the  Lord  and  the  King,  and  meddle  not  with  them  that 
are  given  to  change"     Prov.  xxiv.  21. 

A  public  company  should  not  meddle  with  politics :  nor  let  the  influ- 
ence of  the  company  be  employed  to  produce  any  political  change.  It 
should  not  too  frequently  change  the  principles  and  maxims  of  its  own  gov- 
ernment. Fixed  rules  and  regulations  are  to  a  public  company  what 
habits  are  to  an  individual :  they  insure  a  uniformity  of  conduct,  and  are 
equally  essential  to  success.  A  steady  adherence  to  fixed  principles  is 
the  surest  road  to  prosperity.  A  restless  discontent  with  moderate  profits, 
and  an  attempt  to  get  suddenly  rich,  by  reckless  speculation,  has  been  the 
ruin  of  many  companies  as  well  as  individuals.  Prov.  xxviii.  20 -22. 
Nor  should  they  change  too  often  the  terms  on  which  they  transact  busi- 
ness with  the  public,  as  that  occasions  much  inconvenience.  Nor  change 
too  frequently  the  rate  of  their  dividend,  as  that  may  lead  to  gambling  in 
their  shares.  Better  pay  always  the  same  rate  of  dividend,  and  let  the 
surplus  profit  of  one  year  be  placed  to  a  reserved  fund  to  supply  the  defi- 
ciences  of  future  years. 

"  A  double-minded  man  is  unstable  in  all  his  ways."    James  i.  8. 

"  Unstable  as  water,  thou  shall  not  excel."     Gen.  xlix.  4. 

"  Trust  in  the  Lord  with  all  thine  heart,  and  lean  not  unto  thine  own  understand- 
ing. Be  not  wise  in  thine  own  eyes.  Fear  the  Lord,  and  depart  from  evil."  Prov 
iii.  5-7. 

6.  "  Thou  shalt  NOT  AVENGE,  nor  bear  any  grudge  against  the  children 
of  thy  people,  but  thou  shalt  love  thy  neighbour  as  thyself."   Lev.  xix.  18. 

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A  Treatise  on  Banking. 

In  OMM  of  dispute  or  litigation,  do  not  let  your  judgment  In-  blinded  by 

»elf-i  impartially,  and   do   unto   others  as,  in  a  similar 

owe,  you  would  wish  to  be  done  unto  yourself.     I'se  no  means  of  hostil- 

»r  annoyanee,  «>r  r  rds  oilier  eompanies  whieh   you  would 

nn      -  un    .-'    Of  unfair    \\>  M  'h-A    n-.-d    a^am^t    yourself.      K.-e..m- 

mend  to  others  no  schemes,  or  speeulations,  or  investments,  m  \\hich  you 

would  not  be  willing  to  take  any  slum-  yourself.     <ii\e  no  false  testimoi 

.  ::duee.  others  to  employ  parties  whom  you  would 

not  employ  yourself.  If  you  have  rereived  favors  from  other  companies, 
or  from  individuals,  do  not  let  your  thankfulness  evaporate  in  m«  i-  \,,t.  s 
of  thanks,  or  acclamations  of  applause,  but  render  to  others  the  same  tok- 
en of  gratitude  which,  under  the  same  circumstances,  you  would  expeet 
to  receive  yourself.  "AH  things  whatsoever  ye  would  that  men  should 
do  unto  you,  do  ye  even  so  to  them,  for  this  is  the  law  and  the  prophets." 
VJ  I  1-J. 

!t'  thine  rnftny  be  hungry,  give  him  bread  to  eat  ;  nnd  if  he  he 
thirsty  give  him  water  to  drink  ;  for  thou  shah  heap  coals  of  fire  upon  his 
head,  and  the  Lord  will  reward  thee."  Prov.  xxv.  21,  22. 

If  there  be  a  run  on  a  banking  company,  the  rival  hanking  companies 
should  render  assistance,  and  not  sutler  a  solvent  hank  to  stop  payment  for 
want  of  temporary  sup|>ort.     AH   hostile  companies  should  render:: 
ance  to  each  other  on  the  occurrence  of  calamities,  to  which  all  are  liable. 

"  Rejoice  not  when  thine  enemv  falleth,  and  let  not  thine  heart  be  glad  when  ho 
stumlikth.  lest  the  Lord  see  it.  and  it  di>|>lrii«c  him.  ami  hi-  turn  away  his  wrath  from 
him."  I'rov.  xxiv.  17,  1H  It  is  iniite  ri-ht  t<>  rontriid  ai:ain«t  our  rnt-mii-.  ami  to 
rejoice  when  we  are  successful  "I  will  extol  thee,  ()  Lord,  for  thou  hast  lifted  mo 
uj>,  and  hast  not  made  my  foes  to  rejoice  over  me."  Pa.  xxx.  1 . 

But  it  is  not  right  to  rejoice  when  the  wrath  of  Providence  permits 
them  to  fall  into  calamity,  or  to  stumble  into  acts  of  vice  or  folly.  A 
railway  company  should  not  rejoice  when  accidents  occur  on  a  rival  line  ; 
nor  a  banking  company  when  a  rival  hank  has  made  a  large  amount  of 
bad  debts ;  nor  an  insurance  society  when  extensive  fires  or  numerous 
deaths  have  absorbed  the  funds  of  a  rival  society  ;  nor  a  mining  associa- 
tion when  accidents  have  damaged  the  mines  belonging  to  a  rival  asso- 
ciation. 

'  He  that  i*  (rlad  at  calamities  shall  not  he  unpunished.1'    Prov.  xvii.  5. 

If  lour  enemies  treat  yon  in  a  different  manner,  you  should  not  imitate  their  exam- 
ple, nut  forgive  them.  '•  Recompense  no  man  evil  for  evil.''  Kom.  xii.  17. 

-I/.-t  all  bitterness,  and  wrath,  and  anger,  and  clamor,  and  evil  speaking,  he  put 
away  from  you.  with  all  malice  ;  and  lie  ve  kind  one  to  another,  t«-mi.T-ln -arti-d,  for- 
giving one  another,  even  as  God  for  Christ's  sake  hath  forgiven  you."  K]>h.  iv.  ;n,  32. 

8.  "  If  any  man  will  sue  thff  at  the  7a«»,  and  take  away  thy  coat,  let 
him  hare  thy  cloak  also."  Matt.  v.  40. 

(1.)  If  he  have  an  equal  claim  to  the  coat  and  the  cloak,  and  the  law 
decides  that  he  is  justly  entitled  to  the  coat,  give  him  the  cloak 
though  he  do  not  claim  it.     Do  what  is  just,  though  the  law  may  not 
require  it,  and  never  have  recourse  to  a  legal  quibble  in  order  to  ha  flic  a 
just  demand. 


Moral  and  Religious  Duties. 

"  The  thoughts  of  the  righteous  are  right,  but  the  counsels  of  the  wicked  are  de- 
ceit." Prov.  xii.  5. 

(2.)  Do  not  go  to  law  without  mature  deliberation. 

"  Go  not  forth  hastily  to  strive,  lest  thou  know  not  what  to  do  in  the  end  thereof, 
when  thy  neighbour  hath  put  thee  to  shame."  Prov.  xxv.  8. 

(3.)  Nor  yet  about  matters  of  trifling  importance  which  are  no  practi- 
cal injury. 

"  Strive  not  with  a  man  without  cause,  if  he  have  done  thee  no  harm."    Prov.  iii.  30. 
(4.)  Nor  yet  from  vindictive  motives. 

"  Say  not  thou,  I  will  recompense  evil,  but  wait  on  the  Lord,  and  he  shall  save 
thee."  Prov.  xx.  22. 

(5.)  Never  go  to  law  about  matters  in  which  you  have  no  direct  in- 
terest. 

"  He  that  passeth  by,  and  meddleth  with  strife  belonging  not  to  him,  is  like  one  that 
taketh  a  dog  by  the  ears."  Prov.  xxvi.  17. 

(6.)  Do  not  go  to  law  with  a  man  merely  because  he  is  poor,  and 
therefore  unable  to  contend  against  your  large  capital ;  nor  trespass  on 
any  man's  rights  because  he  cannot  afford  the  expense  of  obtaining  legal 
redress. 

"  Bob  not  the  poor  because  he  is  poor,  neither  oppress  the  afflicted  in  the  gate,  for 
the  Lord  will  plead  their  cause,  and  spoil  the  soul  of  those  that  spoiled  them."  Prov. 
xxii.  22,  23. 

(7.)  It  will  be  wise  and  honorable  to  bring  the  suit  to  a  close  as  soon 
as  you  can. 

"  It  is  an  honor  for  a  man  to  cease  from  strife,  but  every  fool  will  be  meddling." 
Prov.  xx.  3. 

(8.)  If  you  reject  a  just  and  honorable  compromise,  you  may  lose  the 
action,  and  you  will  then  not  only  have  to  pay  the  expense  of  the  suit, 
but  you  will  have  put  yourself  in  a  disreputable  position. 

"Agree  with  thine  adversary  quickly,  while  thou  art  in  the  way  with  him,  lest  at 
any  time  the  adversary  deliver  thee  to  the  judge,  and  the  judge  deliver  thee  to  the  offi- 
cer, and  thou  be  cast  into  prison.  Thou  shall  by  no  means  come  out  thence  till  thou 
hast  paid  the  uttermost  farthing."  Matt.  vi.  25,  26. 

(9.)  Do  not  indulge  a  fondness  for  litigation. 

"  He  loveth  transgression  that  loveth  strife,  and  he  that  exaltcth  his  gate  seeketh 
destruction."  Prov.  xvii.  19. 

(10.)  If  you  have  to  sue  any  party  criminally,  enforce  the  law  with 
kindness  and  forbearance. 

"  Execute  true  judgment,  and  show  mercy  and  compassion,  every  one  to  his  broth- 
er." Zech.  vii.  9. 

Tt  is  quite  possible  to  execute  judgment  and  show  mercy  at  the  same 
time. 

(11.)  If  called  upon  to  arbitrate  between  contending  parties,  act  justly 
and  impartially. 

"  Thou  shall  not  respect  the  person  of  the  poor,  nor  honor  the  person  of  the  mighty? 
but  in  righteousness  shult  thou  judge  thy  neighbour."  Lev.  xix.  15.  "  Thou  shall  not 

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A  Treatise  on  Banking. 

I:  thon  ahalt  not  iwpoet  persons :  neither  take  a  cift  ;  for  a  gift  doth 
blind  OM  eyw  of  the  wiae,  and  ponrert  the  word*  of  the  righteous."    Dcut  x 

(12.)  Public  companies  should  employ  none  but  honorable  men  to 
plctui  any  cause  in  which  tin  y  may  be  engaged.  Advocates  \\1>« 
noted  for  legal  quibbling,  attacking  private  character,  nr  bn>\\  healing  \\it- 
nesjse*,  should  nut  be  engaged  ;  and,  more  especially,  tin-  stumling  coun- 
sel oC  a  public  company  should  be  a  man  of  high  moral  and  religious 
|ili-. 

\Vlini  ha«t  thoo  to  do  to  declare  my  statute*  T    Thou  givest  thy  mouth  to  <  vil,  ami 
Mguo  franu-th  il«->(it      IV  1   K/-19.  —  They  speak  TSJrity  «ren  «i\<-  with  liis 
MtghlMiur  :  with  flattering  lip*  and  with  a  double  heart  do  tlicy  speak,      i  In   I.onl  nhall 
I  all  flattering  lip*,  and  the  tongue  that  cpcnkcih  pnm<l  ;hin^.-:  *!• 
oar  tongue  will  we  prevail .  uur  lips  arc  our  uwn  :  win-  is    I.«nl  «\<  r  u-  '     IV 
xii.  2-4.  —  There  is  that  speaketh  like  the  piercings  of  a  sword :  >>ut  tin-  :.m-u<-  »t 
the  wise  U  health.    The  lip  of  truth  shall  be  established  for  ever  :  l>ut  a  :_ 
is  but  for  a  moment    Deceit  is  in  the  hcurt  of  them  Unit  inia-inu  evil :  but  to  the 
counsellors  of  peace  is  joy."    Prov.  xii.  18  -  20. 

9.  w  Be  ye  all  of  one  mt'nd,  having  compassion  one  of  another ;  love,  as 
brethren  ;  be  pitiful,  be  courteous"     1  Pet  iii.  8. 

Be  of  one  mind.  —  Public  companies  should  entertain  a  pood  feeling 
towards  each  other,  and  nnlravour  to  promote  each  other's 
proper  occasions,  thi-y  ought  to  unite  their  influence  for  tin-  protection  of 
their  mutual  rights. 

Be  courteous.  —  All  the  servants  of  the  company  who  come  into  com- 
munication with  the  public  should  be  instructed  to  h«-liave  with  the  utmost 
courtesy  ;  and  if  they  do  so,  they  ore  entitled  to  courtesy  in  return.  No 
shareholder  should  address  a  servant  of  the  company  as  if  In:  \M 
own  individual  servant;  nor  should  he,  in  his  transactions  with  the  com- 
pany, expect  any  undue  attention  or  preference  on  account  of  his  being  a 
shareholder.  Whan  a  company  has  occasion,  in  its  annual  report  or  pub- 
lic documents,  to  refer  to  the  proceedings  of  other  companies,  it  should 
always  be  done  in  the  language  of  court 

Be  pitiful  (full  of  pity).  —  In  some  cases,  life  policies  become  forfeit- 
ed through  the  inability  of  the  parties  to  pay  the  premiums,  and  sometimes 
by  the  party  meeting  his  death  in  a  way  that  deprives  hi.s  .  ,f  all 

claim  on  the  company.  In  cases  like  these,  insurance  companies  should 
take  all  the  circumstances  into  consideration,  and  be  pitifuL  \Vln-n  an 
honest  tradesman  fails,  and  his  creditors  agree  to  take  a  composition,  the 
banking  company  should  not  refuse  to  accept  the  terms  proposes. 
should  be  pitiful.  When  the  servant  of  a  company  has  inadvertently 
committed  an  error,  not  involving  any  moral  delinquency.  N  t  him  not  )>'• 
too  hastily  dismissed,  and  thus  placed  for  life  in  a  lower  condition,  but  f>e 
pitiful.  When  servants  of  the  company,  from  sickness  or  old  uge,  have 
become  leas  effective  than  formerly,  let  arnuiL-'-men's  be  ma.1.-  f.,r  render- 
ing their  duties  proportionate  to  their  diminished  s:ieiu::li.  Recollect 
were  ow  id  healthy,  and  you  Lad  then  the  benefit  of  their  ser- 

vices,—  do  not  treat  them  harshly  i.«\v.     J!r  /////////. 

10.  **  Use  hospitality  one  to  another,  without  grudging.'1     1  Pet.  iv.  9. 

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Moral  and  Religious  Duties. 

It  is  proper  that  public  companies,  on  particular  occasions,  such,  for  ex- 
ample, as  the  opening  of  a  new  line  by  a  railway  company,  should  enter- 
tain their  friends  and  others  connected  with  the  company.  Also,  that  the 
companies  should  use  hospitality  "  one  towards  another."  Social  inter- 
course tends  to  promote  friendly  feelings ;  and  a  friendly  feeling  between 
the  principal  officers  and  members  of  different  companies  tends  to  pro- 
mote a  friendly  feeling  between  the  companies  themselves.  It  is  also  a 
good  practice  to  give  an  annual  dinner  to  all  the  servants  of  the  company. 
The  words  "  without  grudging  "  may  suggest  that  when  the  company  can 
afford  it,  these  entertainments  should  be  given  in  a  rather  handsome  style, 
without  a  too  strict  regard  to  economy.  On  these  festive  occasions,  the 
humbler  servants  and  others  connected  with  the  company  should  not  be 
forgotten. 

"  When  thou  makest  a  feast,  call  the  poor,  the  maimed,  the  lame,  the  blind.  And 
thou  shall  be  blessed :  for  they  cannot  recompense  thee ;  for  thou  shalt  be  recom- 
pensed at  the  resurrection  of  the  just."  Luke  xiv.  13,  14. 

11.  "Thou  shalt  not  oppress  a  stranger,  for  ye  know  the  heart  of  a 
stranger,  seeing  ye  were  strangers  in  the  land  of  Egypt."    Exod.  xxiii.  9. 

The  principle  of  this  suggestion  is,  that  we  ought  to  have  compassion 
for  all  those  who  are  in  the  same  difficulties  in  which  we  formerly  were 
ourselves.  Those  whom  Providence  has  raised  to  a  higher  station  than 
they  or  their  fathers  occupied,  should  entertain  kindly  feelings  towards 
those  who  belong  to  the  class  from  whence  they  have  sprung.  The  same 
rule  applies  to  public  companies.  Those  which  have  overcome  the  diffi- 
culties of  their  formation,  and  become  prosperous,  should  not  employ  any 
vexatious  or  oppressive  means  of  preventing  the  growth  of  similar  compa- 
nies. Knowing  the  anxieties  they  experienced  from  the  difficulties  they 
had  to  encounter,  they  should  not  inflict  similar  anxieties  upon  others. 
Moses  often  enforces  the  duty  of  kindness  towards  servants  and  strangers, 
by  reminding  the  Israelites  that  they  had  been  strangers  and  bondsmen  in 
the  land  of  Egypt  In  questions  of  morals,  it  is  generally  a  safe  guide 
to  a  correct  judgment,  to  put  ourselves  in  the  position  of  others,  and  to 
inquire  what  then  would  be  our  own  feelings,  and  what  kind  of  conduct 
we  should  wish,  under  such  circumstances,  to  be  adopted  towards  our- 
selves. In  the  decision  of  such  cases,  it  usually  appears  that  the  cultiva- 
tion of  the  moral  feelings  has  improved  the  intellectual  faculties.  A 
sound  heart  is  less  likely  to  go  astray  than  a  clever  head. 

"  The  entrance  of  thy  words  giveth  light :  it  giveth  understanding  unto  the  simple." 
Ps  cxix.  130. 

12.  "  Masters,  give  unto  your  servants  that  which  is  just  and  equal, 
knowing  that  ye  also  have  a  Master  in  heaven."     Col.  iv.  1. 

Be  just  in  your  appointments,  and  select  those  who  are  the  most  wor- 
thy and  the  best  qualified  for  the  duties  they  will  have  to  discharge.  Be 
just  in  the  amount  of  your  remuneration ;  recollect  that  many  of  the  ser- 
•rants  of  public  companies  have  greater  trusts  and  heavier  responsibilities 
than  the  servants  of  individuals ;  and  in  this  case,  it  is  just  and  equal 
that  they  be  rewarded  accordingly.  Be  just  in  your  promotions,  and 
let  not  merit  be  supplanted  by  patronage  or  favoritism.  Be  just  in  the 
HH*  401 


A  TVeoltM  on  Banking. 

quantity  of  labor  f«tt  exact.  Appoint  a  sull'icn-nt  number  <>f  servants  to 
do  the  wo  IK>  not  Comprl  them  to  keep  late  hour-  ;  nor  P 

reawnable  holidays,  for  the  purges  of  health  and  recreation.  Be  /;/</ 
in  your  pensions,  mid  In  your  aged  and  worn-out  servan'-  he  treated 
with  respect  and  liberality.  1  if  just  in  your  jv/m"  '<.  "  I'oi  !»-armg 
ihrcatriimi;.'1  Kpli.  '  •  cen-un  s  nor  your  punishments 

be  more  than  proportionate  to  the  OObllMI  niul  be  as  ready  at  all  times  to 
acknowledge  v  <•!'  \<"ir  -•  nants  as  to  notice  tlieir  delects. 

All  complaints, and  all  application--  for  increased  remuneration  or  privi- 
!•  ••:•  •-.  from  the  servants  of  public  companies,  should  receive  mature  con- 
sideration ;  and  all  refusals  should  he  ^;\.  n  with  kindne-s  and  com 

\\lieti  reduced  to  distress,  consoled  himself  with  the  rejection,  that 
in  his  fonn.-r  prosperity,  whi-n  he  was  the  greatest  of  nil   the   men  of  the 
.  (Job  xxxi.  13,)  he  had  not  despised  the  cause  of  his  man-servant  or 
--ervant  when  they  contended  with  him.     Moses  enacted,  "Thou 
not  mur.zle  the  ox  when  he  trendeth  out  the  com"  (I  lent.  \\v.  4); 
and  St.  Paul  has  twice  quoted  this  enactment  ( 1  Cor.  ix.  9  ;  1  Tim.  v.  IN  ) ; 
:iculcute   the  lesson   that  we   oiijzlit   not   to  stint  the  remuneration.  i,..r 
ments,  of  those  by  whose  labor  we  profit     There  is  some- 
thing touching  in  the  following  text :  —  "A  certain  centurion's  servant, 
irAo  teas  dear  unto  him,  was  sick,  and   ready  to  die."   Luke  vii.  2.     And 
the  Psalmist  has  given  us  a  lovely  exhibition  of  the  Divine  character  in 
the  words,  ••  He  hath  pleasure  in  the  prosperity  of  his  servants."  1'salm 

i:{.  "  K.xhort  srrrants  in  be  obedient  unto  thrir  own  mastrrs,  and  to 
please  them  well  in  all  things,  not  answering  again,  not  purloining,  hut 
skotring  all  good  fid  rlitij.  that  they  may  adorn  the  doctrine  of  Cod  our 
Saviour  in  all  things."  Titus  ii.  9,  10. 

Public  companies  have  a  right  to  expect  that  their  servants  should  not 
only  be  obedient  during  the  official  hours  of  business,  but  that  at  all  times 
their  conduct  should  be  such  as  will  be  reputable  to  the  company,  at- 
tempting to  "please  them  well  in  all  things,"  "not  answering  again," 
not  objecting  to  obey  any  lawful  commands,  "not  purloining,  but  show- 
ing  all  good  fidelity,"  not  misapplying  the  property  with  which  they  arc 
intrusted,  not  suffering  the  company  to  be  defrauded  or  damaged  by  other 
parties.  "That  they  may  adorn  the  doctrine  of  God  our  Saviour  in  all 
things,"  the  servantsof  a  public  company  are  exposed  to  observation  and 
criticism,  and  its  honorable  reputation  in  the  world  will  he  all'ected  by  the. 
estimate  that  may  be  formed  of  their  moral  and  religions  character. 

•ian  principle  is  of  more  importance  than  brilliant  talents,  and  is 
more  highly  respected,  even  by  the  ungodly.     The  personal  character  of 
iti  sen-ants  is  sometimes  of  greater  value  to  a  company  than  their  |.<  r- 
nonal  services,  and  can  less  easily  be  replaced.     They  adorn  the  '/«< 
of  Christianity  when,  from  Christian  motives,  they  jiructi.w  \\.< 
which  are  suitable  :  wral  sta'ions.     It  gives  us  a  pleasing  idea  (,f 

social  life  amoriL'  the  Hebrew*,  when  we  find   that   not   only  did   the   chil- 
dren addrcM  the  Suprei:  -  :he  <  lod  of  tlieir  fathers,  but  th- 
v  ants  add  reaped  H                             of  their  inasVrs.      "()  Lord  Cod  of  my 
master  Abraham,"  said  ;  s  "  I  pray  Th<  e  m  nd  m<-  good 


Moral  and  Religious  Duties. 

speed  this  day,  and  show  kindness  unto  my  master  Abraham."  Gen. 
xxiv.  12.  It  is  one  of  the  duties  of  the  servants  of  public  companies  to 
pray  for  the  prosperity  of  the  company  whom  they  serve. 

14.  "  Pure  religion,  and  undefined  before  God  and  the  Father,  is  this, 
to  visit  the  fatherless  and  widows  in  their  affliction,  and  to  keep  himself 
unspotted  from  the  world."     James  i.  27. 

Establish  a  fund  for  the  relief  of  the  widows  and  children  of  the  ser- 
vants of  the  company.  Such  a  fund  is  established  by  the  East  India 
Company  and  by  the  Bank  of  England,  and  why  not  by  all  large  compa- 
nies ?  Mining  and  railway  companies  should  relieve  the  widows  and  chil- 
dren of  those  who  meet  with  accidents  in  their  respective  works.  The 
word  VISIT  implies  that  this  relief  should  be  generous  and  kind  ;  and  the 
words  IN  their  affliction  may  suggest  that  it  ought  to  be  prompt  and  im- 
mediate, not  postponed  till  after  their  affliction. 

15.  "  As  we  have  opportunity,  let  us  do  good  unto  all  men,  especially 
unto  them  who  are  of  the  household  of  faith."     Gal.  v.  10. 

Let  all  your  arrangements  be  adapted  to  promote  the  public  good,  and 
more  especially  to  benefit  the  moral  and  religious  portion  of  the  com- 
munity. 

"  He  that  diligently  seeketh  good,  procureth  favor ;  but  he  that  seeketh  mischief,  it 
shall  come  unto  him."  Prov.  xi.  27. 

Among  the  minor  immoralities  of  the  present  age  we  are  disposed  to 
place  the  practice  of  smoking  cigars,  to  the  extent  to  which  it  is  now  car- 
ried. We  refer  to  smoking  in  the  streets,  on  board  of  steamboats,  and  in 
places  of  public  resort,  where  the  smoker  can  obtain  his  enjoyment  only 
by  annoying  others,  and  thus  violating  the  injunction,  "  Thou  shalt  love 
thy  neighbour  as  thyself."  The  public  are  much  indebted  to  the  railway 
companies  for  prohibiting  this  practice  in  their  carriages  and  establish- 
ments, and  it  is  desirable  that  the  steamboat  companies  should  adopt  simi- 
lar regulations. 

III.  Having  considered  the  duties  of  patriotism,  and  the  duties  of  social 
relationship,  we  now  come  to  the  duties  of  religion. 

By  the  duties  of  religion  we  mean  the  duties  we  owe  directly  to  God. 
Those  which  are  most  applicable  to  public  companies  are,  to  acknowl- 
edge the  hand  of  God,  to  promote  his  worship,  and  to  reverence  his 
Sabbaths. 

To  acknowledge  the  power  and  goodness  of  God,  and  our  dependence 
on  Him  for  all  the  blessings  we  possess,  is  not  less  the  duty  of  a  public 
company  than  it  is  of  an  individual.  Moses  cautions  the  Israelites  against 
forgetfulness  of  God  in  the  time  of  their  prosperity :  — 

"  Beware  that  thou  forget  not  the  Lord  thy  God,  in  not  keeping  his  commandments, 
and  his  judgments,  and  his  statutes,  which  I  command  thce  this  day :  lest  when  thou 
hast  eaten  and  art  full,  and  hast  huilt  goodly  houses  and  dwelt  therein  ;  and  when  thy 
herds  and  thy  flocks  multiply,  and  thy  silver  and  thy  gold  is  multiplied,  and  all  that 
thou  hast  is  multiplied  ;  then  thine  heart  he  lifted  up,  and  thou  saycst  in  thine  heart, 
My  power  and  the  might  of  mine  hand  hath  gotten  me  this  wealth.  Bui  thou  *halt 
remember  the  Lord  thy  God :  for  it  is  he  who  gave  thee  power  to  get  wealth."  Deut. 
viii.  11-18. 

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A  Treatise  on  Banking. 

A  neglect  to  acknowledge  the  Imnd  of  God  is  denounced  as  a  heinous 
offence.  The  rhief  national  crime  charged  against  ancient  T\re  l.y  the 
prophet  K.zekiel  was, — 

-  By  thy  grMU  wUdom  ami  ihy  traffic  thon  Im^t  in«-rra.sed  thy  riches,  and  thy  heart 
i<  lift.'-d  uj>  IHTUU.»«  of  thy  riche*."  Eick  \  \ 

will  nut  lay  it  to  li«-:irt,  f.>  pv«>  ^l..ry  unto  my  name, 

MUth  the  Lord  of  Host*,  I  will  even  tend  a  riirsc  upon  you,  and  I  \sill  curse  your 
•ing*."    Ma! 

They  who  honor  inferior  agents,  but  forget  the  Cause  of  nil  their  pros- 
perity, arc  compared  to  the  heathen  fishermen  who  "sacrifice  unto  their 
net,  and  hum  incense  unto  their  drag,  because  by  them  tin 'ir  portion  is 
fat,  and  their  meat  plenteous.'"  Ilab.  i.  16. 

In  ancient  Rome  the  merchants  and  bankers  had  a  public  procession 
every  year  to  the  temple  of  Mercury, —  who,  by  a  strange  association, 
was  regarded  as  the  god  of  merchants  and  of  hankers,  of  thieves  and 
of  eloquence,  —  to  offer  sacrifices  for  the  blessings  they  ha<l  received; 
and,  as  the  satirists  said,  to  ask  forgiveness  for  all  the  frauds  and  tricks 
they  had  practised  in  their  trade  during  the  past  year. 

In  the  Middle  Ages,  the  public  companies  then  formed  took  mottoes, 
many  of  which  were  expressive  of  religious  feelings.  Th.is,  if  \\< 
our  eyes  on  our  Royal  Exchange,  we  shall  see  that  the  City  motto  i* 
**  Domine  dirige  Nos";  and  that  of  the  Mercers' Company  is  "Honor 
Deo."  This  would  not  be  consistent  with  the  manners  of  the  present 
age,  though  we  believe  our  public  companies  are  as  much  disposed  to  im- 
plore l>i\ine  direction,  and  to  render  to  <  Jod  the  honor  of  their  success,  as 
any  of  the  associations  of  former  days.  The  way  to  obtain  this  di- 
rection, and  to  have  occasion  for  rendering  this  honor,  is  to  acknowledge 
the  superintendence  and  kindness  of  God. 

"  In  all  thy  ways  acknowledge  him,  and  he  shall  direct  thy  paths."     Prov.  iii  6. 
"  Call  upon  me  in  the  day  of  trouble;  I  will  deliver  tlu-e,  und  thou  slujilt  ylorify  mt.n 
Pi,  1.  15. 

We  are  not  friendly  to  the  introduction  of  religious  matters,  either  by 
individuals  or  public  bodies,  into  secular  intercourse.  We  have  no  wish 
that  our  business  meetings  should  commence  with  prayer,  and  conclude 
with  the  doxology.  But  surely  there  must  be  some  way  in  which  a  public 
company  may,  consistently  with  our  national  character  and  the  mrmn<  n 
of  the  age,  express  its  reliance  on  Divine  Providence,  and  its  gratitude 
for  the  favors  that  Providence  has  conferred.  Is  there  no  way  in  which  a 
public  company  may  virtually  utter  the  sentiments  so  beautifully  ex- 
pressed by  David :  — 

1  irid  bleated  the  Lord  before  all  the  congregation  :  nml  said,  Blessed  be  thon, 
Lord  God  of  Israel,  our  Father,  for  ever  and  ever.  Thine,  O  Lord,  is  the  ^maneta, 
and  the  power,  and  the  glory,  and  the  victory,  and  the  majesty  ;  for  :i!l  that  is  in  the 
heaven  and  the  earth  is  thine:  thine  is  the  kingdom,  O  Lord,  and  thou  art  exalted  as 
head  above  all.  Both  riches  and  honor  come  of  th<-e,  and  thon  rei^ne-t  over  all ;  and 
in  thine  hand  is  power  and  mi^ht;  and  in  thine  hund  it  i.s  to  make  ^n  >:.  und  t< 
strength  unto  all.  Now.  then-fore,  our  God,  wo  thank  thee,  und  prai-<-  thy  ^lurioiin 
name.  But  who  am  I.  and  what  is  my  people,  that  we  should  be  ahh-  to  offer  so  wil- 
lingly after  this  sort;  for  all  things  come  of  thee,  and  of  thine  own  have  we  piv<  u 
the*.%  1  Chron.  xxix.  10-14. 

404 


Moral  and  Religious  Duties. 

Another  religious  duty  is,  to  support  the  public  worship  of  God.  Hu- 
man legislation  can  enforce  a  small  portion  only  of  the  moral  and  relig- 
ious duties  of  mankind,  and  can  never  interfere  until  vice  has  grown  into 
crime.  Some  writers  on  moral  philosophy  have  divided  the  social  rights 
of  man  into  perfect  and  imperfect.  The  perfect  rights  can  be  enforced  > 
by  human  laws.  The  enactments  referring  to  these  rights  are  generally 
expressed  in  a  negative  form  :  "  Thou  shalt  not  kill "  ;  "  Thou  shalt  not. 
steal."  The  imperfect  righjs  cannot  be  enforced  perfectly  by  human 
laws.  These  enactments  are  generally  positive  :  "  Honor  thy  father  and 
thy  mother"  ;  "  Thou  shalt  love  thy  neighbour  as  thyself."  The  fourth 
commandment  has  one  of  each  kind :  "  Thou  shalt  do  no  manner  of 
work  " ;  "  Remember  the  Sabbath  day  to  keep  it  holy."  Religion  ex- 
tends her  sway,  not  only  over  all  the  actions  of  man,  but  over  the  mo- 
tives and  springs  of  action  (Exod.  xx.  17  ;  Matt.  xv.  19).  Religious  and 
moral  principles  implanted  in  the  mind  of  the  community  are  the  only  se- 
curity for  the  performance  of  religious  and  moral  duties,  and  the  only 
means  of  acquiring  the  happiness  which  the  performance  of  these  duties 
tends  to  produce. 

While  we  maintain,  in  the  words  of  our  motto,  that  "  property  has  its 
duties  as  well  as  its  rights,"  we  maintain,  with  equal  firmness,  that  prop- 
erty has  its  rights  as  well  as  its  duties ;  and  they  who  disregard  its  rights 
have  no  claim  on  the  performance  of  its  duties.  But  though  the  rights 
of  property  are  as  sacred  as  any  other  rights  (Mark  x.  19),  yet  they  are 
the  first  to  be  disregarded  among  an  immoral  or  an  irreligious  population. 
As  a  portion  of  the  property  class,  therefore,  public  companies  should 
support  the  extension  of  moral  and  religious  principles,  as  a  means  of  se- 
curing the  safe  and  quiet  enjoyment  of  their  possessions.  The  mainte- 
nance of  the  public  worship  of  God  is  one  means  of  extending  the  knowl- 
edge and  influence  of  these  principles. 

But  apart  from  motives  of  interest,  it  is  no  less  the  duty  of  public  com- 
panies, than  of  individuals,  to  promote  the  honor  of  their  Creator  and 
Benefactor ;  and  to  diffuse  among  others  those  blessings  that  attend  the 
discharge  of  religious  obligations. 

Public  companies  should  not  only  give  to  all  their  servants  the  means 
of  attending  public  worship,  but  they  should  also  contribute  towards  its 
support  in  the  district  in  which  their  operations  are  carried  on.  The 
houses  and  the  lands  they  occupy,  if  not  held  by  them,  would  probably 
be  occupied  by  others  who  would  thus  contribute.  It  is,  therefore,  as 
much  their  duty  as  it  is  the  duty  of  the  other  parishioners  to  provide  the 
means  of  religious  instruction  for  their  neighbours.  Contributions  tow- 
ards this  object,  may  not  only  be  a  suitable  way  of  performing  the  duty 
to  which  we  have  referred,  that  of  acknowledging  their  obligations  to  the 
Divine  Being,  and  of  extending  those  principles  by  which  their  own  prop- 
erty is  rendered  more  secure,  but  also  of  promoting  the  piety,  and,  con- 
sequently, the  happiness  of  all  the  members  of  the  community,  and  of 
discharging  a  duty  to  which  is  distinctly  attached  the  promise  of  temporal 
prosperity. 

"  Bring  ye  all  the  tithes  into  the  storehouse,  that  there,  may  he  meat  in  mine  house, 
and  prove  me  now  herewith,  said  the  Lord  of  Hosts,  if  I  will  not  ojxm  you  the  win- 

405 


A  Trcatitf  on  Banking. 

Jowv  of  Heart n,  and  poor  yon  oat  a  blessing,  that  there  shall  not  bo  room  enough  to 
rewire  it"    Mai.  in.  10. 

Another  religious  duty  is  to  reverence  the  Sabbath-day. 

•  ••d  only  with  reference  to  the  present  lit'f,  tin-  institution  of  the 
Sabbath-day  is  one  of  the  greatest  blessings  that  religion  has  conferred 
upon  man  :  — 

"  Homember  the  Sabbath-day  to  keep  it  holy :  in  it  thou  shall  not  do  any  work." 
Kxod.  xx.  8  -  10. 

It  may  be  observed,  that  this  is  the  only  one  of  the  ten  commandments 
that  we  are  expressly  enjoined  to  enforce  upon  our  households,  and  some 
of  the  most  awful  denunciations  and  threatrnings  in  the  Holy  Scriptures 
are  directed  against  the  violation  of  the  Sabbath-day.  AlVr  tin-  return 
from  the  Babylonish  captivity,  Nehemiah  was  the  most  anxious  to  enforce 
th«  due  observance  of  the  Sabbath  :  — 

"  In  those  day*  saw  I  in  Judah  some  treading  wine-presses  on  the  Sabbath,  and 
bringing  in  sheaves,  and  lading  asses ;  as  also  wine,  grapes,  and  figs,  and  all  man- 
ner of  burdens,  which  they  lirou-lit  into  Jerusalem  on  the  Sabbath-day :  and  I  testi- 
8ed  against  them  in  the  tiny  wherein  they  sold  victuals.  There  dwelt  men  of  Tyre 
also  therein,  which  brought  fish,  and  all  manner  of  ware,  and  sold  on  the  SuMiuih 
onto  the  children  of  Judah,  and  in  Jerusalem.  Then  I  contended  with  the  nobles  of 
Judah,  and  said  unto  them,  What  evil  thing  is  this  that  ye  do,  and  profane  tl: 
bath-day!  Did  not  your  fathers  thus,  and  did  not  our  <;<><1  bring  all  this  evil  nj.i.n 
os  and  upon  this  city  "  Yet  ye  bring  more  wrath  upon  Israel  by  profaning  the  Sab- 
bath." Xeh.xiii.  15-18. 

The  design  of  the  Sabbath  is  to  insure  an  interval  of  bodily  r« 
more  especially  for  the  humbler  classes  of  society  (Deut.  v.  14) ;  to 
change  the  current  of  thought,  and  thus  to  preserve  the  mental  powers  in 
a  state  of  vigor  and  freshness ;  to  give  leisure  for  reflection,  and  thus 
enable  man  to  look  above  him,  and  around  him,  and  within  him,  and 
consider  his  own  character  and  destiny ;  and  to  furnish  opportunity 
for  the  discharge  of  those  duties  of  piety,  of  kindness,  and  of  benevo- 
lence, which  devolve  upon  him  as  a  moral  and  religious  being.  To  ex- 
press thankfulness  for  past  mercies  is  specially  named  as  one  of  the  duties 
to  be  performed  (Deut.  v.  15) ;  and  these  feelings  are  beautifully  ex- 
pressed in  the  100th  Psalm :  — 

*  O  be  joyful  in  the  Lord,  all  yc  lands.  Serve  the  Lord  with  gladness :  and  come 
before  his  presence  with  a  sontr.  He  ye  sure  that  the  Ix>rd  he  is  God :  it  is  he  that 
hath  made  us,  and  not  we  ourselves;  we  are  his  people,  and  the  sheep  of  his  pasture. 
O  go  your  way  into  his  gates  with  thank-giving,  and  into  his  courts  with  praise :  be 
thankful  unto  him,  and  speak  good  of  his  name.  For  the  Lord  he  is  gracious :  his 
merry  is  everlasting ;  and  his  truth  cndureth  from  generation  to  generation."  Prayer- 
book*  translation. 

The  institution  of  the  Sabbath-day  must  not  be  regarded  as  diminishing 
the  produce  of  annual  labor.  By  improving  the  habits  and  invigorating 
the  mental  powers,  it  increases  the  annual  produce  of  labor,  both  in  re- 
gard to  nations  and  individuals. 

The  labor  of  the  Sunday  tends  not  to  wealth.     It  is  not  the  man  who 

•  Is  Sunday  to  the  week"  of  toil,  who  employs  that  holy  day  in  at- 

t<-nrling  to  his  ordinary  business  or  in  making  up  his  books,  —  no,  it  is  not 

he  who  is  in  the  surest  road  to  riches.     It  is  the  man  who,  when  the  Sun- 

406 


Moral  and  Religious  Duties. 

day  dawns,  feels  his  mind  expand  with  new  and  exhilarating  and  en- 
nobling associations  ;  who,  accompanied  by  his  family,  appropriately  at- 
tired, pays  his  morning  homage  in  the  temple  of  religion,  and  passes  the 
remainder  of  the  day  in  works  of  charity  or  piety,  or  in  innocent  re- 
laxations corresponding  with  the  sanctity  of  the  day;  —  that  is  the  man 
who,  by  improving  the  intellectual,  the  moral,  and  the  social  faculties  of 
his  mind,  is  adopting  the  surest  means  of  acquiring  wealth  and  respecta- 
bility in  the  world. 

They  greatly  err  who  imagine  they  are  pleading  the  cause  of  the  poor 
when  they  endeavour  to  remove  the  religious  sanctions  of  the  Sabbath- 
day.  Should  the  mass  of  the  population  once  entertain  the  impression 
that  the  observance  of  the  Sunday  is  not  required  by  religion,  but  is 
merely  a  matter  of  convenience  or  expediency,  the  poor  will  then  have 
no  security  for  cessation  from  toil.  Reasons  will  soon  be  found,  based 
apparently  upon  a  regard  for  the  poor,  for  increasing  their  labor.  Let 
the  Sunday  be  regarded  no  longer  as  a  day  of  devotion,  but  merely  as  a 
day  of  pleasure,  and  it  will  soon  become  a  day  of  toil. 

Were  the  Sunday  abolished,  the  poor  man  would  receive  no  more 
wages  for  his  seven  days'  labor  than  he  now  does  for  his  six.  His  scale 
of  comforts  would  be  reduced,  as  he  would  have  no  occasion  for  a  Sun- 
day's attire.  His  opportunities  of  social  intercourse  and  of  moral  im- 
provement would  be  abolished.  In  this  and  in  other  cases  it  is  shown 
that  Religion,  while  she  is  the  guide  and  solace  of  the  wealthy,  is  pre- 
eminently the  friend  and  guardian  of  the  poor.  (See  a  work  just  pub- 
lished, on  The  Temporal  Benefits  of  Christianity,  by  Robert  Blakey, 
Longman.) 

If  it  be  the  duty  of  nations  and  of  individuals  to  observe  the  Sabbath- 
day,  it  must  equally  be  the  duty  of  public  companies.  We  read  of  no 
dispensation  in  their  favor.  The  prohibition  of  any  manner  of  work 
does  not  except  the  work  of  public  companies.  It  is  not  said  that  all 
men-servants  and  maid-servants  shall  have  rest  except  the  servants  of 
public  companies.  Nor  are  we  taught  that  the  violation  of  the  Sabbath- 
day  will  bring  down  judgments  upon  nations,  but  none  upon  public  com- 
panies. 

But,  as  in  domestic,  so  in  social  life,  there  are  certain  works  of  ne- 
cessity, and  many  duties  that  must  be  performed,  even  on  the  Sabbath- 
day.  (Isa.  xlix.  15;  Luke  xiii.  15;  xiv.  5.)  In  these  cases  a  public 
company  will  act  like  the  head  of  a  religious  family.  All  the  secular 
duties  that  can  be  postponed  will  be  postponed  to  the  following  day. 
Other  duties  will  be  performed  in  such  portions  of  the  day  as  will  permit 
as  many  servants  as  possible  to  attend  Divine  service  ;  and  those  servants 
who  cannot  be  thus  favored  will  be  allowed  other  seasons  for  the  perform- 
ance of  this  duty.  (We  omit  here  the  discussion  of  the  question  respect- 
ing Sunday  travelling  by  railways,  as  inappropriate  to  the  present  work.) 

We  will  not  attempt  to  specify  in  detail  all  the  works  that  may  lawfully 
be  performed  by  public  companies,  or  by  individuals,  on  the  Sabbath-day. 
We  will  merely  observe  that,  though  "  the  Sabbath  was  made  for  man, 
and  not  man  for  the  Sabbath  "  (Mark  ii.  27),  yet,  at  the  same  time,  they 
who  most  religiously  keep  holy  the  Sabbath-day,  may  expect  to  share 

407 


A   Tr tat  isc  on  Banking. 

largely  of  those  spiritual  and  tcmpoml  benefits  its  institution  was 
designed  to  bestow. 

"If  tboa  torn  awav  thy  foot  from  the  Sabbath,  from  doing  thy  pleasure  on  my  holy 
day  ;  and  rail  the  Sabbath  a  delight,  the  holy  of  the  Lord,  honorable  ;  and  shall  honor 
him,  not  doing  thine  own  way*,  nor  tiiuling  thine  own  pleasure,  nor  speaking  thino 
own  word*:  then  shall  thou  di-li^ht  thyself  in  ihe  Lord;  and  I  will  can--  tl 
•IDE  UPON  TUB  HIGH  FLACKS  or  THE  KAKTii,  ami  feed  ihce  with  tlic  heritage  of 
Jacob  thy  Father :  for  the  mouth  of  the  Lord  hath  Hpokcn  it"  Isa.  Iviii.  13,  U. 

IV.  The  last  class  of  duties  are  the  duties  of  benevolence. 

By  the  duties  of  benevolence,  we  mean  the  duties  we  owe  to  the  poor. 

Throughout  both  the  Old  and  the  New  Testament  there  is  no  duty 
more  frequently  enforced  than  this,  —  nor  one,  to  the  performance  of 
which  there  is  attached  so  many  promises  of  temporal  prosperity. 

Mom,  besides  enacting  many  laws  that  had  an  especial  bearing  upon 
the  welfare  of  the  poor,  enjoined,  moreover,  the  duty  of  voluntary  be- 
nevolence. 

*  And  if  thy  brother  be  waxen  poor,  and  fallen  in  decay  with  thee ;  then  thou  shall 
relieve  him :  though  he  be  a  stranger,  and  a  sojourner."    Lev.  xxv.  35. 

14  For  the  poor  shall  never  cease  out  of  the  land  :  therefore  I  command  thee,  saying, 
Thou  shall  open  thy  hand  wide  unto  thy  brother,  to  thy  poor,  and  to  thy  needy,  in  thy 
land."  Dent  XT.  11. 

The  devotional  exercises  of  the  Israelites  abound  with  benedictions  on 
those  who  pitied  the  poor. 

"  Blessed  is  he  that  considereth  the  poor :  the  Lord  will  deliver  him  in  time  of 
trouble.  The  Lord  will  preserve  him,  and  keep  him  alive ;  and  he  shall  be  blessed 
upon  the  earth :  and  thou  wilt  not  deliver  him  unto  the  will  of  his  enemies.  The 
Lord  will  strengthen  him  upon  the  bed  of  languishing :  thou  wilt  make  all  his  bed  in 
his  sickness."  Ps.  xli.  1,  2,  3. 

Job  said  :  — 

*  When  the  ear  heard  me,  it  blessed  me ;  and  when  the  eve  saw  me,  it  gave  witness 
to  me:  because  I  relieved  the  poor  that  cried,  and  the  fatherless,  and  him  that  had 
none  to  help  him.    The  blessing  of  him  that  was  ready  to  perish  came  upon  me ;  and 
I  caused  the  widow's  bean  to  sing  for  joy."    Job.  xxix.  11-13. 

In  the  Proverbs  of  Solomon,  we  read  :  — 

"  He  that  hath  pity  upon  the  poor  lendeth  unto  the  Lord ;  and  that  which  he  hath 
given  will  he  pay  him  again."  Prov.  xix.  17. 

"  He  that  hath  a  bountiful  eye  shall  be  blessed ;  for  he  givcth  of  his  bread  to  the 
poor."  Prov.  xxil  9. 

14  He  that  bath  mercy  on  the  poor,  happy  is  he."    Prov.  xiv.  21 . 

Seasons  of  festivity  were  celebrated  by  granting  relief  to  the  poor. 

"The  days  wherein  the  Jews  rested  from  their  enemies,  and  the  month  which  was 
turned  unto  them  from  sorrow  to  joy,  and  from  mourning  into  a  good  day :  that  they 
should  make  them  days  of  feasting  and  joy,  and  of  sending  portions  one  to  another, 
and  gifts  to  the  poor."  Esther  ix.  22. 

u  This  day  U  holv  unto  the  Lord  your  God  ;  mourn  not,  nor  weep.  Go  jour  way, 
eat  the  fat  and  drink  the  sweet,  and  send  portions  unto  them  for  whom  nothing  is  pre- 
pared." Neh.  viii.  9,  10. 

In  the  New  Testament,  we  read  :  — 

*  Give,  and  it  shall  be  given  unto  you  ;  good  measure,  pressed  down,  and  shaken  to- 

408 


Moral  and  Religious  Duties. 

gethcr,  and  running  over,  shall  men  give  into  your  bosom.  For  with  the  same  meas- 
ure that  ye  mete  withal,  it  shall  be  measured  to  you  again."  Luke  vi.  38. 

"  Charge  them  that  are  rich  in  this  world,  that  they  be  not  high-minded,  nor  trust  in 
uncemin  riches,  but  in  the  living  God,  who  giveth  us  richly  all  things  to  enjoy ;  that 
they  do  good,  that  they  be  rich  in  good  works,  ready  to  distribute,  willing  to  commu- 
nicate ;  laying  up  in  store  for  themselves  a  good  foundation  against  the  time  to  come, 
that  they  may  lay  hold  on  eternal  life."  1  Tim.  vi.  17  - 19. 

"  Whoso  hath  this  world's  goods,  and  seeth  his  brother  have  need,  and  shutteth  up 
his  bowels  of  compassion  from  him ;  how  dwelleth  the  love  of  God  in  him  ?  "  1  John 
hi.  17. 

On  the  other  hand,  the  most  awful  denunciations  are  directed  against 
those  who  are  unfeeling  towards  the  poor  :  — 

"  He  that  oppresseth  the  poor  reproacheth  his  Maker :  but  he  that  honoreth  him 
hath  mercy  on  the  poor."  Prov.  xiv.  31. 

"  Whoso  stoppeth  his  ears  at  the  cry  of  the  poor,  he  also  shall  cry  himself,  but  shall 
not  be  heard."  Prov.  xxi.  13. 

"  He  that  oppresseth  the  poor,  to  increase  his  riches ;  and  he  that  giveth  to  the  rich, 
shall  surely  come  to  want."  Prov.  xxii.  1 6. 

"  He  that  giveth  unto  the  poor  shall  not  lack ;  but  he  that  hideth  his  eyes  shall  have 
many  a  curse."  Prov.  xxviii.  27. 

The  rule  by  which  public  companies,  as  well  as  individuals,  should 
regulate  the  amount  of  their  contributions  to  religious  and  charitable  pur- 
poses, is  distinctly  laid  down  in  the  Holy  Scriptures,  —  it  is  their  ability. 

"  Every  man  shall  give  as  he  is  able,  according  to  the  blessing  of  the  Lord  thy  God 
which  he  hath  given  thee."  Deut.  xvi.  17. 

"  Thou  shall  truly  tithe  all  the  increase  of  thy  seed,  that  the  field  bringeth  forth  year 
by  year."  Deut.  xiv.  22. 

"  Upon  the  first  day  of  the  week  let  every  one  of  you  lay  by  him  in  store,  as  God 
hath  prospered  him."  1  Cor.  xvi.  2. 

The  spirit  of  these  instructions  appears  to  be,  that  public  companies 
should  devote  to  religious  and  charitable  purposes  a  certain  proportion  of 
their  annual  profits.  What  that  proportion  should  be,  must  be  determined 
by  each  individual  company.  All  public  companies  have  the  advantage 
of  knowing  the  exact  amount  of  their  annual  gains. 

"  Be  thou  diligent  to  know  the  state  of  thy  flocks,  and  look  well  to  thy  herds." 

The  principle  of  this  injunction  is,  balance  your  books  every  half-year, 
in  order  to  ascertain  the  state  of  your  affairs,  and  the  amount  of  your 
profits.  In  all  cases  we  think  it  better  that  a  fixed  sum  should  be  set 
apart  at  the  commencement  of  the  year,  rather  than  the  amount  should 
be  regulated  by  the  caprice  of  the  moment.  We  think  it  a  good  practice, 
even  for  individuals,  and  especially  for  young  men  commencing  life,  to 
determine,  like  Jacob  (Gen.  xxviii.  22),  that  a  certain 'part  of  their  future 
gains  should  be  devoted  to  the  cause  of  piety  and  benevolence.  We 
are  not  friendly  to  religious  vows  ;  but  we  think  every  prudent  man, 
(and  public  companies  are  presumed  to  be  assemblies  of  prudent  men,) 
should  have  fixed  principles  of  action,  and  not  let  his  discharge  of  pious 
and  charitable  duties  depend  on  the  impulse  of  the  moment. 

"  Every  man  according  as  he  purposeth  in  his  heart,  so  let  him  give,  not  grudgingly 
or  of  necessity,  for  God  loveth  a  cheerful  giver."  2  Cor.  ix.  7. 

This  language  seems  to  imply,  that  the  amount  devoted  to  acts  of 
II  409 


A   Trtatise  on  Banking. 

charity  should  be  the  result  of  previous  deliberation,  and  that  those  who 
have  fixed  the  amount  by  a  previous  purpose,  give  with  more  cheerful- 
ness  than  those  whose  miixls  |.n •>•  -m  »n  every  occasion  a  conflict  l»-:\. 
the  suggestions  of  liberality  and  those  of  selfishness,  and  who  grudgingly 
comply  with  the  solicitations  of  others,  or  give  as  a  necessity  imposed  on 
ihrni  by  their  social  position. 

We  are  no  advocates  for  indiscriminate  charity.  We  think  that  nun 
of  business  (and  of  such  our  public  companies  are  usually  composed) 
should  show  the  same  prudence  in  the  exercise  of  their  charity  as  thi-y 
would  on  other  occasions ;  they  should  endeavour  to  ascertain  tin-  way  of 
doing  the  most  good  with  equal  means,  and  should  look  to  the  remote  as 
well  as  to  the  immediate  effects  of  their  Ix-nevolencc. 

The  first  claim  on  their  liberality,  is  that  of  the  parish  or  district  in 
which  the  company  conducts  its  operations.  As  the  locality,  if  not  occu- 
pied  by  a  company,  would  probably  be  occupied  by  individuals,  the  com- 
pany is  morally  bound  to  subscribe  to  the  local  charities  as  liberally  as 
would  be  done  by  individuals  of  equal  wealth.  Another  claim  is,  that  of 
charities  whose  object  has  some  connection  with  the  object  of  the  com- 
pany, or  which  would  relieve  the  distress  of  parties  employed  by  the 
company. 

There  are  also  extraordinary  cases,  wherein,  by  a  sudden  visitation  of 
Providence,  there  is  general  distress  ;  such  as  when,  by  a  revulsion  of 
trade,  large  masses  of  men  are  thrown  out  of  employment ;  or  the  occur- 
rence of  famine,  pestilence,  or  fire.  In  these  coses  the  appeal  is  nut  made 
to  us  in  our  local  or  professional  character,  but  to  our  national  feeling,  or 
to  our  common  humanity  ;  and  then  public  companies  have  the  same  du- 
ties to  perform  as  would  fall  upon  individuals  of  equal  wealth.  On  the 
other  hand,  there  are  occasions  wherein  private  charity  is  more  useful 
than  public  charity  ;  and  it  may  become  the  duty  of  public  bodies,  as  well 
as  of  individuals,  to  exercise  their  benevolence  in  secret.* 

But  it  is  not  necessary  that  kindness  to  the  poor  should  always  take  the 
form  of  almsgiving.  It  is  often  better  to  prevent  poverty  than  to  relieve 
it,  —  to  give  employment  rather  than  money,  —  to  grant -a  loan,  than  to 
bestow  alms.  And  sometimes  public  companies  can  so  construct  their 
business  arrangements,  as,  without  any  pecuniary  sacrifice,  greatly  to 
promote  the  interest  and  the  comfort  of  the  humbler  classes  of  the  com- 
munity. Public  companies  should  also  cooperate  in  endeavouring  to  raise 
the  social  condition  of  the  poor,  by  diminishing  the  hours  of  labor,  by  re* 
lieving  women  and  children  from  unsuitable  or  oppressive  toil,  and  by  ex- 
tending among  the  rising  population  the  benefits  of  religious  education. 

•  Matt  vi.  1  -4.  It  appears  to  as,  that  one  of  the  least  useful  modes  of  benefiting 
the  poor  U  that  of  permanent  endowments.  It  seems  much  better  that  £  1,000  were 
distributed  immediately  to  the  poor,  than  that  this  sum  were  iim-tnl  in  the  funds, 
and  the  interest  doled  oat  to  the  poor  of  distant  generations.  Let  tin-  U -m-x  oli -nee  of 
the  pre»cni  age  relieve  the  distress  of  the  present  age  ;  and  let  as  hope  that  the  benevo- 
lence of  future  ages  will  be  equal  to  our  own,  and  equally  commensurate  with  the  dis- 
tress which  mar  then  exist.  This  immediate  and  broadcast  charity  seems  to  answer 
best  to  the  scriptural  description :  "  He  hath  dispersed  abroad ;  In  /»///.  </itvit  to  the 
poor;  his  righteousness  —  not  his  legacies  —  endure th  for  ever."  Is.  cxii.  9  ;  2  Cor. 
ut.  9 

410 


Moral  and  Religious  Duties. 

To  remove  the  ignorance  of  the  poor  is  a  duty  not  less  important  than 
to  relieve  their  distress. 

The  God  of  the  Bible  is  described  as  "  the  God  of  knowledge  "  (1  Sam. 
ii.  3) ;  and  he  has  implanted  in  the  minds  of  his  creatures  a  faculty  for  ac- 
quiring and  increasing  knowledge.  The  exercise  and  improvement  of  this 
faculty  is  as  much  a  duty  as  the  improvement  of  any  other  talent  with  which 
we  are  intrusted.  And  from  the  claims  of  our  common  humanity,  and  from 
the  relation  we  all  sustain  to  the  same  Creator  (Mai.  ii.  10 ;  Acts  xvii. 
26),  it  becomes  our  duty  also  to  aid  others  in  their  pursuit  of  knowledge. 
The  cultivation  of  our  intellectual  faculties  does  not  diminish,  but  increases 
and  refines  our  physical  comforts,  augments  our  social  pleasure  by  impart- 
ing to  each  individual  additional  claims  to  regard,  exalts  our  devotional 
feelings  by  unlocking  more  of  the  wisdom  and  goodness  manifested  in  the 
works  of  God  ;  and  while  the  amiable,  though  injurious,  aberrations  of  the 
moral  and  religious  feelings  are  controlled  by  the  judgment,  the  adjudica- 
tions of  reason  on  moral  and  religious  questions  are  aided  and  guided  by 
an  instructed  and  enlightened  conscience.  It  is  quite  possible  for  all 
these  advantages  to  be  extended  to  every  individual  in  the  community. 

It  is  peculiarly  the  duty  and  the  interest  of  the  rich  to  educate  the  poor  : 
the  morals  of  their  children,  and  the  comfort  of  their  families,  depend 
much  on  the  religious  education  of  their  servants.  Among  an  educated 
population,  the  rights  of  property,  —  the  effects  of  capital  on  the  demand 
for  labor,  and  the  useful  tendency  of  what  are  called  luxuries,  —  and  the 
necessity  for  order  and  subordination  in  the  state,  will  be  better  under- 
stood. In  proportion  as  the  mass  of  the  population  are  instructed  will  be 
the  amount  of  national  happiness  and  prosperity.  Mighty  is  the  monarch, 
great  is  the  statesman,  who  can  direct  the  united  energies  of  a  nation  of 
cultivated  minds.  The  education  of  the  poor  is  a  duty  even  more  incum- 
bent upon  public  companies  than  upon  individuals.  For  it  is  to  the  inven- 
tions and  improvements  in  science,  often  made  by  persons  of  the  working 
class,  that  many  of  them  owe  their  existence.  Improvements  in  the  ap- 
plication of  steam  have  produced  most  of  our  present  mining,  and  steam- 
boat, and  railway  companies.  Increased  attention  to  statistics  and  the 
laws  of  mortality  has  multiplied  our  insurance  companies.  The  general 
principle  on  which  all  our  companies  are  founded,  —  the  power  of  asso- 
ciation, —  is  itself  the  offspring  of  modern  science.  Our  public  compa- 
nies are  triumphs  of  mind  ;  they  denote  a  high  degree  of  civilization,  and 
exhibit,  most  strikingly,  the  command  of  man  over  the  elements  of  nature, 
as  well  as  over  the  beasts  of  the  field,  and  his  power  in  compelling  the 
inert  properties  of  matter  to  become  the  active  ministers  of  his  will. 

Great  is  the  debt  of  gratitude  due  by  all  our  public  companies  to  the 
cause  of  mental  cultivation  ;  and  when  these  companies  are  computing 
the  annual  gains  which  from  this  source  they  have  acquired,  let  them  not 
forget  that  the  Genius  of  Mental  Cultivation,  supported  by  Benevolence, 
Patriotism,  and  Religion,  and  attended  by  crowds  of  the  uninstructed  chil- 
dren of  the  indigent,  stands  at  their  door,  and  humbly  asks  payment  of  a 
portion  of  this  debt. 

Let  them  in  part  discharge  this  debt,  by  seeing  that  the  children  of 
their  laborers,  and  the  people  of  the  district,  are  all  supplied  with  the 

411 


A  Treatise  on  Banking. 

moans  of  instruction.  And  afterwards,  lot  them  patronize  those  societies 
which  have  for  their  object  the  education  of  the  child  n. -M  of  tho  poor  in 
other  districts,  and  throughout  the  land.  They  should  also,  as  far  as  it 
can  be  done  with  justice  to  others,  give  promotion  to  such  of  their  ser- 
vants as  devote  their  leisure  to  the  cultivation  of  their  munis.  The  time 
has  gone  by  wlion  it  wns  a  reproach  for  a  young  man  to  be  bookish,  as 
he  was  supposed  to  abstract  so  much  more  time  and  attention  from  his 
official  duties.  It  is  now  well  known  that  the  general  cultivation  of  the 
intellectual  powers,  renders  them  more  effective  in  every  operation  in 
which  thry  may  be  exercised.  It  is  a  great  advantage  to  a  public  com- 
pany to  have  educated  servants.*  Their  superior  knowledge  is  always 
useful,  —  the  mental  discipline  they  have  acquired  improves  their  business 
habits,  —  and,  possessing  within  themselves  a  constant  source  of  enjoy- 
ment, they  are  the  less  likely  to  indulge  in  those  expensive  pleasures 
which  are  the  usual  temptation  to  neglect  and  dishonesty.  Prov.  iii.  13-15; 
ir.  7-9. 

THIRDLY.  —  Having  ascertained  that  public  companies  are  moral  agents, 
and  having  described  the  duties  which,  as  moral  agents,  they  are  bound 
to  perform,  we  shall  now  inquire  what  arc  the  rewards  or  punishments 
which  may  be  expected  to  follow  the  performance  or  non-performance  of 
these  duties. 

A  liability  to  rewards  or  punishments  is  essential  to  moral  agency.  To 
say  that  public  companies  are  moral  agents,  but  that  they  will  not  be  re- 
warded or  punished  for  any  thing  they  may  do,  would  be  to  assert  a  con- 
tradiction. In  pursuing  our  inquiries,  ill.  n  fore,  on  this  subject,  we  shall 
ask  :  —  I.  At  what  time  will  these  rewards  or  punishments  be  received  ? 
II.  What  will  be  their  nature  ?  III.  In  what  manner  will  they  be  ap- 
plied ?  and  IV.  What  are  the  effects  these  doctrines  should  produce  on 
the  conduct  of  public  companies  ? 

I.    When  will  these  rewards  or  punishments  be  bestowed  ? 

From  the  established  order  of  Providence,  which  causes  virtue  to  be 
followed  by  happiness,  and  vice  by  misery  (Prov.  xi.  31),  and  from  the 
dispositions  implanted  in  the  mind  of  man,  t  it  may  fairly  be  inferred, 

*  "  It  secmi  likely  that  next  rear  a  movement  will  be  made  in  favor  of  universal 
education.  I  think  it  desirable  that  bank  managers,  and  branch  managers,  should  aid 
this  movement  in  their  respective  localities,  and  tthould  support  generally,  )>v  their  as- 
sistance and  influence,  the  formation  of  literary  and  scientific  institutions.  This  would 
•fiord  an  outlet  for  any  surplus  energy  of  character  that  mi^ht  remain  after  the  hours 
of  boaine**,  and  enable  them  to  promote  the  public  good,  without  taking  part  in  politi- 
cal or  religions  discussions.  They  would  acquire  for  themselves  much  pleasurable 
and  profitable  amusement,  would  add  to  the  usefulness  and  respectability  of  their  char- 
acter in  public  estimation,  and  thus  be  enabled  to  increase  the  influence  of  their  respec- 
tive estaoUshmenU." — A  farther  Extract  from  the  Letter  auoted  at  page  148. 

t  Rom.  u.  14,  15.  Some  writer*  on  moral  philosophy  have  denied  that  man  DOS- 
»es*«*  jbose  moral  powers  which  are  usually,  hut  perhaps  not  very  properly,  calico  the 
moral  MM*;  and,  to  support  their  sentiments,  they  have  adduced  the  immoral  practices 
of  various  nations  in  ancient  and  modern  times ;  such  as  infanticide,  the  burning  of 
widow*,  Ac.  They  might  as  well  have  collected  together  all  the  erroneous  opinions  in 
the  art*  and  science*  that  have  prevailed  in  different  ages  of  the  world,  and  then  have 
mferral,  that  man  is  Dot  endowed  with  reason. 

412 


Moral  and  Religious  Duties. 

that  the  Creator  and  Governor  of  the  world  is  a  God  of  truth,  and  without 
iniquity,  just  and  right  is  he  (Deut.  xxxii.  4).  And  as  he  also  possesses 
omnipotent  power,  he  will  assuredly  carry  his  dispositions  and  purposes 
into  effect,  But  on  comparing  these  attributes  of  the  Supreme  Governor 
of  the  universe  with  the  actual  destiny  of  the  righteous  and  the  wicked  in 
the  present  world,  we  do  not  perceive  that  perfect  union  of  virtue  with 
happiness,  and  of  vice  with  misery,  which  our  contemplation  of  the 
Divine  character  would  lead  us  to  expect,  and  inquiring  minds  have  often 
been  puzzled  for  a  solution  of  this  difficulty. 

"  Righteous  art  thou.  0  Lord,  when  I  plead  with  thee  :  yet  let  me  talk  with  thee  of 
thy  judgments  :  wherefore  doth  the  way  of  the  wicked  prosper  ?  wherefore  are  all  they 
happy  that  deal  very  treacherously?"  "jer.  xii.  ]. 

"  Thou  art  of  purer  eyes  than  to  behold  evil,  and  canst  not  look  on  iniquity :  where- 
fore (then)  lookest  thou  upon  them  that  deal  treacherously,  and  holdest  thy  tongue 
when  the  wicked  devoureth  the  man  that  is  more  righteous  than  he  1 "  Hab.  i.  13. 

"  As  for  me,  my  feet  were  almost  gone ;  my  steps  had  well  nigh  slipped.  For  I  was 
envious  at  the  foolish,  when  I  saw  the  prosperity  of  the  wicked."  Ps.  Ixxiii.  2,  3. 

The  book  of  Job  is  a  controversy  upon  this  question. 
The  friends  of  Job  maintained  the  proposition,  that  the  destiny  of  men 
in  the  present  life  corresponded  with  their  moral  character. 

"  Eemember,  I  pray  thee,  who  ever  perished,  being  innocent  ?  or  where  were  the 
righteous  cut  oft'?  Even  as  I  have  seen,  they  that  plough  iniquity,  and  sow  wicked- 
ness, reap  the  same."  Job  iv.  7,  8. 

"  Behold,  God  will  not  cast  away  a  perfect  man,  neither  will  he  help  the  evil  doers." 
Job  viii.  20. 

"  If  thou  wert  pure  and  upright ;  surely  now  he  would  awake  for  thee,  and  make  the 
habitation  of  thy  righteousness  prosperous."  Job  viii.  6. 

Job  does  not  admit  this  proposition,  but  declares  that  sometimes  u  the 
tabernacles  of  robbers  prosper,  and  they  that  provoke  God  are  secure, 
into  whose  hand  God  bringeth  abundantly."  Job  xii.  6. 

In  attempting  the  solution  of  this  difficulty,  it  may  be  observed  that, 
though  not  universally,  yet  generally,  virtue  and  happiness,  vice  and  mis- 
ery, are  associated  in  the  dispensations  of  Providence  in  the  present  world. 
And,  indeed,  in  all  the  moral  sciences,  the  general  propositions  are  subject 
to  exceptions,  —  the  moral  sciences  differing,  in  this  respect,  from  the  ab- 
stract and  the  physical  sciences ;  or,  to  use  the  language  of  logicians,  there 
is  a  metaphysical,  a  physical,  and  a  moral  universality  (Watts's  Logic). 
Thus,  though  it  be  a  general  rule  in  political  economy,  that  the  diligent 
hand  maketh  rich,  yet  there  are  some  diligent  hands  that  do  not  become 
rich.  And  though  it  be  a  general  rule  in  the  science  of  education,  that  if 
you  train  up  a  child  in  the  way  he  should  go,  when  he  is  old  he  will  not 
depart  from  it,  yet  there  are  some  melancholy  exceptions.  And  thus  it 
is  a  general  rule,  that  the  righteous  are  prosperous  and  the  wicked  miser- 
able, in  the  present  world,  subject  only  to  those  "exceptions  to  which  all 
general  rules,  in  the  science  of  morals,  are  liable.  It  may  also  be  observed, 
that,  when  those  exceptions  do  occur,  the  prosperity  of  the  wicked,  and  the 
afflictions  of  the  righteous,  are  only  of  a  short  duration  (Ps.  xxxiv.  19  ;  Job 
xx.  5),  and  often  even  rectify  themselves  ;  the  afflictions  of  the  righteous 
leading  to  prosperity,  and  the  prosperity  of  the  wicked  leading  to  destruc- 
tion. Gen.  xlv.  7,  8  ;  Prov.  i.  32. 

II*  413 


A  Treatise  on  Banking. 

It  may,  moreover,  be  contended,  thnt  outward  circumstances  are  i 
tain  index  of  happiness;  that  tin-  wicked  man,  :m>l<l  ull  his  prosperity, 
may  have  a  conscience  that  shall  hit»>  as  an  adder  (Pn>v.  xxiii.  IW) ;  or 
have  some  particular  circumstance  that  shall  give  him  so  much  an- 
noyance as  to  nullity  all  the  pleasures  of  his  success.  Esther  v.  1 1  -  III. 
\\  hi'.f,  on  the  other  Jiaiul,  the  righteous  man  may  possess  such  inward 
sources  of  happiness,  OR  shall  enable  him  to  rejoice  even  in  tribulation. 
lick  x.  Ml;  Hub.  iii.  17,  18. 

But  though  these  considerations  may  lighten,  they  do  not  remove  the 
difficulty.  It  is  not  consistent  with  the  teachings  of  our  intellectual  facul- 
ties, nor  with  the  impulses  of  our  moral  feelings,  that  a  Being  of  immacu- 
late holiness  and  inflexible  justice,  and  possessed,  moreover,  of  omniscience 
and  omnipotence,  should  permit,  in  even  a  single  instance,  that  virtue 
should  go  unrewarded,  and  vice  should  remain  unpunished.  If  the  Crea- 
tor of  the  world  were  not  a  righteous  Being,  he  would  not  have  implanted 
a  love  of  righteousness  in  the  minds  of  his  creatures ;  and  if  he  be  a 
righteous  Being,  it  is  reasonable  to  expect  that  his  righteousness  should 
appear  in  all  the  operations  of  his  moral  government.  And  as  we  find 
this  is  not  universally  the  case  (Ecclcs.  vii.  15 ;  ix.  2),  we  are  driven  to 
the  conclusion,  that  the  present  state  is  not  a  state  of  final  retribution  ;  that 
the  enjoyments  and  the  atllictions  of  the  present  life  are  intended  chiefly 
as  instruments  of  moral  discipline  ;  and  that  there  is  a  future  state  of  ex- 
istence, in  which  the  final  distribution  of  rewards  and  punishments  will 
take  place.  Thus  reason  concurs  with  revelation  in  teaching  us  that  "  it 
is  appointed  unto  men  once  to  die,  and  after  that  the  judgment."  1  l.-b.  ix. 
27.  The  inequalities  of  the  present  world  will  thus  he  rectified  in  the 
.  and  "  every  man  will  be  rewarded  according  to  his  works."  Prov. 
xxiv.  12. 

But,  however  satisfactory  this  solution  of  the  difficulty  may  be  with  re- 
gard to  individuals,  it  does  not  apply  to  the  cose  of  public  companies. 
Their  existence  commences  and  terminates  in  the  present  world,  and 
they  must  be  rewarded  or  punished  in  the  present  world,  or  they  will 
not  be  punished  or  rewarded  at  all.  In  the  latter  ease  they  are  ex- 
empted from  the  moral  government  of  God.  \Vith  them  virtue  has  no 
reward  and  vice  no  punishment.  In  reply  to  any  exhortations  to  perform 
their  moral  and  religious  duties,  they  may  exclaim,  "  What  is  the  Al- 
mighty, that  we  should  serve  him,  and  what  profit  should  we  have  if  we 
pray  unto  him  ?"  Job  xxi.  15.  "  We  know  not.  the  Lord,  neither  will 
we  obey  his  voice."  Exod.  v.  2.  As,  however,  we  cannot  suppose  that 
God  has  exempted  public  companies  from  his  moral  government,  s\e  must 
infer  that  they  are  punished  or  rewarded  in  the  present  state. 

This  conclusion  rests  upon  the  same  evidence  as  the  argument  we 
have'just  stated.  In  the  former  case  the  argument  stands  thus :  — 

The  Righteous  Governor  of  the  world  must  reword  the  good  and  punish  the  wicked 

Bat  this  it  not  done  in  the  present  world. 

Therefore  there  But  be  a  future  world,  in  which  this  retribution  will  take  place. 

Our  present  argument  stands  thus :  — 

The  Righteous  Governor  of  the  world  must  reward  the  pood  ami  punish  tin-  wick- 
ed, whether  those  actions  arc  jx-rt'iirmctl  by  public  bodies,  or  private  individuals. 

414 


Moral  and  Religious  Duties. 

But  the  public  companies  who  now  perform  good  or  evil  actions  will  not  exist  in  a 

future  world. 
Therefore  public  companies  must  be  rewarded  or  punished  in  the  present  world. 

The  only  way  of  resisting  this  argument  is  either  to  maintain  that  pub- 
lic companies  are  not  moral  agents,  and  therefore  not  responsible  for  their 
good  or  evil  actions,  or  that  they  will  exist  in  a  future  world.  The  for- 
mer part  of  the  alternative  we  think  we  have  sufficiently  refuted,  —  the  lat- 
ter is  too  wild  to  need  refutation.  Luke  xx.  34  -  36.  If  the  marriage 
contract  shall  then  be  dissolved,  d  fortiori,  other  contracts  will  also  be 
dissolved. 

All  the  promises  and  threatenings  of  Scripture  made  to  nations  or 
other  bodies  of  men  have  a  reference  to  the  present  world,  as  it  is  only  in 
the  present  world  that  such  collective  bodies  can,  in  their  corporate  capa- 
city, be  either  punished  or  rewarded. 

II.  What  is  the  nature  of  these  rewards  or  punishments  ? 

The  object  of  a  public  company  is  to  get  wealth,  —  a  few  patriotic 
shareholders  may  have  taken  shares  to  benefit  the  country  or  the  district 
that  may  be  the  field  of  its  operations  ;  but  by  far  the  greater  number 
have  no  other  object  than  to  obtain  a  profitable  employment  for  their 
capital.  A  public  company,  therefore,  cannot  be  considered  as  prosper- 
ous, unless  this  object  be  obtained.  If  then  a  public  company  be  reward- 
ed, it  must  be  by  an  increase  of  its  wealth  ;  if  it  be  punished,  it  must  be 
by  a  diminution  of  its  wealth.  It  may  be  observed,  that  wealth,  riches, 
and  similar  terms,  have  usually  a  relative  meaning.  Generally  they  de- 
note the  amount  of  property  possessed  by  each  individual  in  the  highest 
classes  of  society.  In  this  sense,  wealthy  people  are  comparatively  few. 
But  when  it  is  said  that  "  the  diligent  hand  maketh  rich,"  it  is  not  meant 
that  every  diligent  man  is  placed  at  the  top  of  society,  —  that  would  be 
impossible.  It  means  only,  that  he  possesses  more  property,  and  a  larg- 
er portion  of  the  comforts  of  life,  than  he  would  possess  were  he  not 
diligent.  He  is  rich,  not,  perchance,  as  compared  with  Others,  but  as 
compared  with  his  former  self, 

That  wealth  is  an  evil,  is  not  the  doctrine  of  Scripture  nor  of  common 
sense. 

In  Scripture,  wealth  is  distinctly  called  a  blessing  :  — 

"  The  Lord  hath  blessed  my  master  greatly ;  and  he  is  become  great :  and  he  hath 
given  him  floclcs,  and  herds,  and  silver,  and  gold,  and  man-servants,  and  maid-servants, 
and  camels."  Gen.  xxiv.  35. 

"  Thou  knowest  how  I  have  served  thee,  and  how  thy  cattle  was  with  me.  For  it 
was  little  which  thou  hadst  before  I  came,  and  it  is  now  increased  unto  a  multitude, 
and  the  Lord  hath  blessed  thee  since  my  coming."  Gen.  xxx.  29,  30 

"  The  Lord  blessed  the  latter  end  of  Job  more  than  his  beginning :  for  he  had  four- 
teen thousand  sheep,  and  six  thousand  camels,  and  a  thousand  yoke  of  oxen,  and  a 
thousand  she-asses."  Job.  xlii.  12. 

The  exhortation  given  in  Scripture  to  the  rich,  to  relieve  the  distress 
of  the  poor,  must  be  founded  on  the  principle  that  wealth  is  a  blessing, 
and  that  poverty  is  an  evil ;  for  if  the  poor  are  more  happy,  more  wise, 
and  more  virtuous  than  the  rich,  upon  what  ground  can  the  rich  be  ex- 
horted to  relieve  the  poor  ? 

415 


A  Trtatitt  on  Banking. 

the  cautions  and  admonitions  given  to  the  rich,  assume  the  prin- 
ciple that  wealth  is  a  blessing,  —  "  Better  is  the  poor  that  walketh  in  his 
uprightness,  than  he  that  is  perverse  in  his  ways,  though  he  be  rich." 
I'rov.  xxviii.  6.  This  asserts  that  wealth  is  not  so  great  a  blessing  as 
moral  rectitude  ;  but  still  it  assumes  that  wealth  is  a  blessing.  This  will 
appear  if  we  reverse  tho  sentence  ;  for  though  it  will  thru  be  equally 
true,  yet  for  want  of  this  assumption  it  will  appear  ridiculous;  — 1.< 
is  die  rich  that  walketh  in  his  uprightness,  titan  he  that  is  perverse  in 
his  ways,  though  he  be  poor. 

*  Let  not  the  rich  man  glory  in  his  riches."  Jcr.  ix.  23.  "  Riches  make  themselves 
wings  and  fly  away  a*  an  eagle  towards  heaven."  Prov.  xxiii.  5.  "  Charge  them 
that  are  rich  in  this* world,  that  they  trust  not  in  uncertain  riches."  1  Tim.  \ i  IT. 

All  these  expressions  imply  that  riches  are  blessings,  and  though  they 
partake  of  the  uncertainty  of  all  earthly  blessings,  as  health,  friends,  or 
reputation,  yet  still  they  are  blessings  to  be  received  with  thanksgiving  ; 
1  Tim.  iv.  3 ;  and  to  be  employed  in  promoting  the  honor  of  God ;  2 
Cor.  viii.  7  ;  and  the  good  of  mankind. 

The  Scriptures  do  not  intimate  that  the  personal  enjoyment  of  wealth 
is  necessarily  sinful. 

Wealth,  like  any  other  blessing,may  be  desired  from  inij>n'|>cr  motives, 
James  iv.  3;  and  sought  by  improper  means,  I'rov.  xxviii  i?i! ;  1  Tim. 
vi.  9 ;  and  such  on  ill  regulated  desire  may  become  the  root  of  all  evil, 
1  Tim.  vi.  10.  It  is  also  true,  that  when  wealth  is  obtained  it  has  its 
temptations,  and  so  have  intellectual  superiority,  literary  excellence,  and 
even  religious  attainments.  2  Cor.  xii.  7.  But,  it  is  not  the  honorable 
pursuit  of  wealth,  nor  the  innocent  enjoyment  of  its  advantages,  that 
constitutes  a  crime.  "  The  ground  of  a  certain  rich  man  brought  forth 
plentifully,  and  he  said,  I  will  pull  down  my  burns  and  build  greater,  and 
there  will  I  bestow  my  fruits,  and  will  say  to  my  soul,  Take  thine  ease, 
eat,  drink,  and  be  merry."  Luke  xii.  16-iJO.  There  was  nothing 
wrong  in  this.  His  folly  consisted  in  forgetfulness  of  the  approach  of 
death,  and  his  neglect  of  preparation  for  a  future  state.  And  in  regard 
to  the  other  rich  man,  Luke  xvi.  19,  it  was  not  his  clothing  himself 
in  purple  and  fine  linen,  and  faring  sumptuously  every  day  ;  it  was  his 
omitting  to  relieve  the  poor  man  who  was  laid  at  his  gate,  and  his  neg- 
lecting to  hear  Moses  and  the  prophets,  that  brought  him  to  the  place  of 
torment 

Not  only  is  wealth  represented  in  Scripture  as  a  blessing,  but  it  is  a 
bleating  promised  as  a  reward  to  the  practice  of  virtue  and  piety. 

14  AH  these  blessings  shall  come  on  thec,  and  overtake  thee,  if  thon  shall  hearken 
unto  the  voice  of  the  Lord  thy  God.  —  Blessed  shalt  thou  be  in  the  city,  and  l.li->nl 
Rhaltthou  be  in  the  field.  —  Blessed  shall  lie  thy  l>a>kcl  and  thyMi.ii-.  The  Lord 
shall  command  the  blessing  npon  thee  in  thy  storehouses,  and  in  ull  that  thou  scttest 
thine  hand  unto. —  And  the  Lord  shall  make  thee  plenteous  in  good*,  in  the  fruit  of 
thy  cattle,  and  in  the  fruit  of  thy  ground.  —  The  Lord  >hall  open  unto  tln-e  his  pood 
treasure*,  the  heaven  to  give  the  rain  onto  thy  land  in  his  season,  and  to  bless  all  the 
work  of  thine  hand."  Dent  xxviii. 

ness  is  profitable  unto  all  things,  having  promise  of  the  life  that  now  is  and 
at  that  which  is  to  come.  1  Tim  iv.  8.—  By  humility  nnd  the  f<  ar  of  the  Lord,  arc 
Ate,  honor,  and  life.  Prov.  xxiL  4.  — The'  hles.-ing'of  the  Lord  it  mukeili  rich,  and 

416 


Moral  and  Religious  Duties. 

he  addeth  no  sorrow  therewith.    Prov.  x.  22.  —  That  I  may  cause  them  that  lore  m« 
to  inherit  substance,  and  I  will  fill  their  treasures."    Prov.  viii.  21. 


The  virtues,  upon  the  exercise  of  which  wealth  is  most  frequently 
promised,  are  diligence,  righteousness,  prudence,  liberality  in  the  cause  of 
religion,  and  kindness  to  the  poor. 

1.  Diligence  in  business  :  — 

"The  hand  of  the  diligent  maketh  rich.  Prov.  x.  4.  —  The  hand  of  the  diligent 
shall  bear  rule,  but  the  slothful  shall  be  under  tribute.  Prov.  xii.  24.  —  The  soul  of 
the  diligent  shall  be  made  fat.  Prov.  xiii.  4.  —  The  thoughts  of  the  diligent  tend  only 
to  plenteousness.  Prov.  xxi.  5.  —  Seest  thon  a  man  diligent  in  his  business,  he  shall 
stand  before  kings,  he  shall  not  stand  before  mean  men."  Prov.  xxii.  29. 

"  Wealth  gotten  by  vanity  shall  be  diminished,  but  he  that  gathereth  by  labor  shall 
increase.    Prov.  xiii.  11.  —  Be  thou  diligent  to  know  the  state  of  thy  flocks,  and  look 
well  to  thy  herds."    Prov.  xxvii.  23. 
, 

2.  Righteousness  in  social  transactions :  — 

"  The  curse  of  the  Lord  is  in  the  house  of  the  wicked,  but  he  blesseth  the  habitation 
of  the  just."  Prov.  iii.  33. 

"  He  that  walketh  righteously,  and  speaketh  uprightly ;  he  that  despiseth  the  gain  of 
oppressions,  that  shaketh  his  hands  from  holding  of  bribes,  that  stoppeth  his  ears  from 
hearing  of  blood,  and  shntteth  his  eyes  from  seeing  evil ;  he  shall  dwell  on  high:  his 
place  of  defence  shall  be  the  munitions  of  rocks  :  bread  shall  be  given  him ;  his  water 
shall  be  sure."  Isa.  xxxiii.  15,  16. 

"  And  if  thy  brother  be  sold  unto  thee,  and  serve  thee  six  years ;  then,  in  the  seventh 
year,  thou  shalt  let  him  go  free  from  thee.  And  when  thou  sendest  him  out  free  from 
thee,  thou  shalt  not  let  him  go  away  empty :  thou  shalt  furnish  him  liberally  out  of 
thy  flock,  and  out  of  thy  floor,  and  out  of  thy  wine-press :  of  that  wherewith  the  Lord 
thy  God  hath  blessed  thee  thou  shall  give  unto  him.  It  shall  not  seem  hard  unto  thee 
when  thou  sendest  him  away  free  from  thee ;  for  he  hath  been  ivorth  a  double  hired  ser- 
vant unto  thee,  in  serving  thee  six  years  :  and  the  Lord  thy  God  shall  bless  thee  in  all 
that  thou  doest."  Dent.  xv.  12, 13,  14,  18. 

3.  Prudent  habits :  — 

"  He  that  loveth  pleasure  shall  be  a  poor  man ;  he  that  loveth  wine  and  oil  shall  not 
be  rich.  Prov.  xxi.  17.  —  The  drunkard  and  the  glutton  shall  come  to  poverty,  and 
drowsiness  shall  clothe  a  man  with  rags.  Prov.  xxiii.  21.  —  He  that  tilleth  his  land 
shall  be  satisfied  with  bread,  but  he  that  followeth  after  vain  persons  shall  have  poverty 
enough."  Prov.  xxviii.  19. 

"He  that  is  slothful  in  his  work  is  brother  to  him  that  is  a  great  waster.  Prov.  xviii. 
9.  —  A  prudent  man  foreseeth  the  evil,  and  hideth  himself;  but  the  simple  pass  on  and 
are  punished.  Prov.  xxii.  3.  —  The  sluggard  will  not  plough  by  reason  of  the  cold  ; 
therefore  shall  he  beg  in  harvest,  and  have  nothing.  Prov.  xx.  4.  —  Love  not  sleep, 
lest  thou  come  to  poverty.  Open  thine  eyes  and  thou  shalt  be  satisfied  with  bread. 
Prov.  xx.  13.  —  In  all  labor  there  is  profit :  but  the  talk  of  the  lips  tendeth  only  to 
penury."  Prov.  xiv.  23. 

4.  Liberality  in  the  cause  of  religion :  — 

u  Honor  the  Lord  with  thy  substance  and  with  the  first  fruits  of  all  thine  increase; 
go  shall  thy  barns  be  filled  with  plenty,  and  thy  presses  shall  burst  out  with  new  wine. 
Prov.  iii.  9, 10. 

"  Thou  shalt  truly  tithe  all  the  increase  of  thy  seed,  that  the  field  bringeth  forth  year 
by  year.  And  thou  shalt  eat  before  the  Lord  thy  God,  in  the  place  in  which  he  shall 
choose  to  place  his  name  there,  the  tithe  of  thy  corn,  of  thy  wine,  and  of  thine  oil,  and 
the  firstlings  of  thy  herds  and  of  thy  flocks ;  tliat  thou  mayst  learn  to  fear  the  Lord  thy 
God  always.  And  the  Levite,  (because  he  hath  nor  part  or  inheritance  with  thee,)  and 
the  stranger,  and  the  fatherless,  and  the  widow,  which  were  within  thy  gates,  shall 


A  Treatise  on  Banking. 

com*.  an<l  *haH  eat  and  be  satisfied  ;  thst  the  Ixml  thy  God  may  blew  the«  in  all  the 
work  of  thy  hand  which  thou  doest  "    iK-ut.  xi».  22,  83,  29. 

4.  Kindness'to  the  poor :  — 

*  If  thrrf  ho  nmonjr  yon  a  poor  man  of  on«  of  thy  brethrvn  within  any  of  thy  gatr* 
in  thy  lan.l  whi.h  the  Lord  thy  God  giveth  thee,  thou  .Omit  IK>I  hanlm  i!m,i-  IK  art.  nor 
-hut  thine  hand  from  thy  poof  hmthrr.     Thou  slnilt  min-ly  give  him,  and  tliinc   In-art 
•hall  not  be  grieved  when  ihoii  cmvt  unto  him  :  because  that  for  thi»  thin;;  tin   l...i.l 

«l  «h.ill  bleat  thcc  in  all  thy  works  and  in  all  that  thou  puttcst  tliinc  hand  unto." 
De*t  xv.  7, 10. 

These  are  the  mnximsthat  form  the  Scriptural  art  of  getting  rich.  \\  - 
often  hear  of  other  maxims,  —  such  as, "  Mind  number  one" ;  "  A  penny 
saved  is  u  penny  ir<»t";  "Take  can-  of  the  pence,  and  the  pounds  will 
take  care  of  themselves" ;  **  Charity  begins  at  home."  But  these  in;t\',ms 
are  not  found  among  the  proverbs  of  Solomon,  nor  does  the  Bible  any- 
where teach  us  that  selfishness,  niggardliness,  and  closcfistedncss,  are  the 
road  to  wealth.  The  Scriptural  doctrine  is  the  reverse  of  this  :  — 

"  The  liberal  soal  shall  lie  made  fat:  and  he  that  watcrcth  shall  be  watered  also  him 
•elf.  Prov.  xi.  25  —  The  liberal  devueth  liberal  things  ;  and  by  liberal  tilings  shall  he 
stand."  Ixa.  xxxii.  8. 

*  There  is  that  scatterrth,  and  yet  incrcaseth  ;  and  there  is  that  withholdoth  more 
than  is  meet,  bat  it  tcndcth  to  jwlvertv.     Prov.  xi.  24.  —  He  which  sowcth  sparingly, 
•hall  alfo  reap  sparingly;  and  he  which  sowcth  bountifully  shall  reap  also  bounti- 
fully."  S  Cor.  ix.  6. 

And  even  in  those  cases  in  which  wealth  is  obtained  by  dishonorable 
means,  that  wealth  is  represented  as  soon  departing  from  the  possession 
of  the  individual,  and  passing  into  more  worthy  hands. 

"  He  that  oppresscth  the  poor  to  increase  his  riches,  and  he  that  giveth  to  the  rich, 
shall  sorely  come  to  want.  Prov.  xxii.  16.  —  The  Lord  will  not  suffer  the  soul  of  the 
righteous  to  famish  :  but  he  casteth  away  the  substance  of  the  wicked.  Prov.  x.  3.  — 
He  that  by  usury  and  unjust  gain  incrcaucth  his  substance,  he  shall  gather  it  for  him 
that  will  pity  the  poor."  Prov.  xxviii.  8. 

"The  wealth  of  the  sinner  is  laid  up  for  the  just.  Prov.  xiii.  22.  —  God  giveth  to  a 
man  that  i»  good  in  his  sight  wisdom,  and  knowledge,  and  joy  :  but  to  the  sinner  he 
giveth  travail,  to  gather  and  to  heap  up,  that  he  may  give  to  him  that  is  good  before 
God."  Eccles.  il  26. 

Thus  we  find,  that,  according  to  the  political  economy  of  the  Bible, 
wealth  is  the  gift  of  God,  Eccles.  v.  19 ;  and  it  is  bestowed  by  him  upon 
those  that  fear  God,  and  keep  his  commandments.  This  blessing  is  not 
always  bestowed  on  righteous  individuals,  because  with  individuals  this 
i«  not  a  state  of  final  retribution ;  and  they  are  promised  in  this  world, 
only  such  a  portion  of  the  sunshine  of  prosperity,  as  shall  conduce  to  the 
maturing  of  the  excellencies  of  their  character.  Rom.  viii.  28;  1  Cor.  iii. 
21.  But  with  public  companies  this  is  a  state  of  final  retribution,  and 
hnnce,  with  them  righteousness  will  bring  wealth,  and  wickedness  will 
bring  poverty. 

III.  In  what  manner  are  these  rewards  or  punishments  applied  ? 

Rewards  or  punishments  in  the  present  life  reach  us  as  the  natural  ef- 
fects of  the  virtues  or  vices  which  we  practise,  or  they  fall  upon  us  by  the 
special  visitations  of  Divine  Providence.  There  is  a  natural  connection, 

418 


Moral  and  Religious  Duties. 

for  instance,  between  the  virtue  of  temperance  and  the  blessing  of  health, 
—  between  industry  and  wealth,  —  between  honesty  and  reputation  ;  and 
when  we  read,  "  He  that  tilleth  his  land  shall  be  satisfied  with  bread," 
Prov.  xii.  11 ;"  The  hand  of  the  diligent  maketh  rich,"  Prov.  x.  4,  we 
see  at  once  the  connection  between  the  virtues  practised  and  the  blessings 
that  follow  them. 

But  when  we  read,  "  Honor  thy  father  and  thy  mother,  that  thy  days  may 
be  long,"  Exod.  xx.  12 ;  "  Blessed  is  he  that  considereth  the  poor :  the 
Lord  will  deliver  him  in  time  of  trouble,"  Ps.  xli.  1  ;  we  do  not  so  readily 
see  the  connection  between  the  duty  and  the  blessing.  We  do  not 
see  why  filial  piety  should  be  connected  with  longevity,  nor  why  consider- 
ing the  poor  should  produce  deliverance  from  trouble.  These,  then,  are  to 
be  considered  as  commandments  "  with  promise."  Eph.  vi.  2.  The 
connection  between  the  duty  and  the  blessing  depends  on  the  promises  of 
God.  It  may  so  be,  that  in  the  secret  machinery  of  Providence  the  con- 
nection between  the  virtues  and  the  blessings  may  be  as  natural  and  as  ne- 
cessary in  these  latter  cases  as  in  the  former,  but  the  connection  is  not  so 
obvious  to  us,  and  therefore,  when  these  blessings  occur,  we  view  them 
as  coming  directly  from  the  special  visitations  of  the  Most  High.  It  may 
also  be  observed  that,  even  in  the  former  cases,  the  connection  is  not  so 
necessary  or  so  constant  as  to  supersede  the  necessity  for  the  Divine  bles- 
sing. For  though  industry  has  a  tendency  to  produce  wealth,  yet,  in  ma- 
ny individual  cases,  it  does  not  do  so.  In  this,  and  in  other  moral  laws, 
the  Supreme  Being  appears  to  have  left  them  open  to  exceptions,  in  order 
to  keep  up  the  sense  of  dependence  and  the  feelings  of  devotion  in  the 
minds  of  his  creatures. 

It  may  be  observed,  in  general,  that  a  principle  of  righteous  retaliation 
appears  to  be  the  prevailing  principle  of  the  Divine  government. 

The  Scriptures  abound  with  declarations  of  this  principle  :  — 

"  I  the  Lord  search  the  heart,  I  try  the  reins,  even  to  give  every  man  according  to 
his  ways,  and  according  to  the  fruit  of  his  doings.  Jer.  xvii.  10.  —  Whatever  good 
thing  any  man  doeth,  the  same  shall  he  receive  of  the  Lord."  Eph.  vi.  8. 

''  For  if  ye  forgive  men  their  trespasses,  your  heavenly  Father  will  also  forgive  you  : 
but  if  ye  forgive  not  men  their  trespasses,  neither  will  your  Father  forgive  your  tres- 
passes. Matt.  vi.  14,  15.  —  He  that  doeth  wrong  shall  receive  for  the  wrong  which  ho 
hath  done.  Col.  iii.  25.  —  It  is  a  righteous  thing  with  God  to  recompense  tribulation 
to  them  that  trouble  you."  2  Thess.  i.  6. 

"Judge  not,  that  ye  be  not  judged.  For  with  what  judgment  ye  judge,  ye  shall  be 
judged  :  and  with  what  measure  ye  mete,  it  shall  be  measured  to  you  again."  Matt. 
Vii.  1,2. 

"  Whoso  rewardeth  evil  for  good,  evil  shall  not  depart  from  his  house.  Prov.  xvii. 
13.  —  Whoso  causeth  the  righteous  to  go  astray  in  an  evil  way,  he  shall  fall  himself 
into  his  own  pit.  Prov.  xxviii.  10.  —  They  shall  eat  of  the  fruit  of  their  own  way,  and 
be  filled  with  their  own  devices."  Prov.  i.  31.  , 

This  principle  prevails  throughout  all  the  enactments  of  the  Mosaic  law. 

"  If  a  man  cause  a  blemish  in  his  neighbour ;  as  ho  hath  done,  so  shall  it  be  done  to 
him.  Lev.  xxiv.  19.  —  Eye  for  eye,  tooth  for  tooth,  hand  for  hand,  foot  for  foot.  Exod. 
xxi.  24.  —  If  a  false  witness  rise  up  against  any  man  to  testify  against  him  that  which 
is  wrong;  then  shall  ye  do  unto  him,  as  he  had  thought  to  have  done  unto  his  brother. 
Deut.  xix.  16,  19.  —  Whoso  shcddeth  man's  blood,  by  man  shall  his  blood  be  shed." 
Gen.  ix.  6. 

The  denunciations  of  Scripture  often  refer  to  this  principle. 

419 


A  Treatise  on  Banking. 

*  Y«  shall  not  afflict  any  widow,  or  f«therlc««  child  If  thon  afflict  them  in  anywbt, 
and  they  err  at  all  unto  roc,  I  will  mirrly  hear  their  err ;  ami  your  wive*  •hall  be 
widows,  and  your  children  bo  fatherless.  Kiod.  xxii.  22-24.  —  Because  thou  hut 
•poiled  many  nations,  all  the  remnant  uf  th«>  people  shnll  ••poil  the.-  ll.il-  ii.  H —  The 
children  al*o  of  Jinliih  and  the  ehildrvn  of  Jerusalem  have  ye  sold  nnio  the  Grecians  ; 
and  I  will  noil  your  ion*  and  your  daughter*  into  the  hand  of  the  children  of  Judah, 
and  they  shall  itcll  them  to  the  Sabcani."  Joel  iii.  6,  8. 

Many  of  the  facts  recorded  in  Scripture  illustrate  the  application  of 
this  principle. 

M  But  Adonibesek  fled,  and  they  pursued  after  him,  and  caught  him,  and  cnt  off  hi« 
thumb*,  and  bi»  great  toes;  and  Adonibezek  said,  Threescore  and  ten  kings  having 
their  thumb*  and  their  great  toe*  cut  off,  gathered  their  meat  under  my  table :  as  I  hare 
done,  to  God  hath  requited  me."  Judges  i.  6,  7 

M  Samuel  said  unto  Agag,  As  thy  (word  hath  made  women  childless,  so  shall  thy 
mother  he  childless  among  women.  1  8am.  XT.  33.  —  Klijah  said  to  A  huh,  Thus  saitn 
the  Lord,  In  the  place  where  dogs  licked  the  blood  of  Naboth,  shall  dopi  lick  thy 
blood,  even  thine.  1  Kings  xxi.  19.  —  They  hanged  llamun  on  the  gallows  that  he  hail 
prepared  for  Mordecai."  Esther  vii.  10. 

Providence  seems  to  have  implanted  in  the  mind  of  man  a  desire  of 
witnessing  the  application  of  this  principle.  An  honorable  feeling  of  grat- 
ification arises  in  virtuous  minds,  when  the  man  of  violence,  of  fraud,  or 
oppression,  has  been  punished  in  a  way  corresponding  to  his  crime, 
and  by  means  brought  on  by  his  own  actions.  Hence  the  Psalmist 
preys,  "  Let  the  wicked  full  into  their  own  nets,  whilst  that  I  withal  es- 
cape." Ps.  cxli.  10.  "  Let  his  net  that  he  hath  hid  catch  himself:  into 
that  very  destruction  let  him  fall."  Ps.  x.xxv.  8.  And  In-  n-jnin-s  in  wit- 
ncssing  the  accomplishment  of  his  desires.  "  The  wicked  is  snared  in 
the  work  of  his  own  hands.  The  heathen  are  sunk  down  in  the  pit  that 
they  made :  in  the  net  which  they  hid  is  their  own  foot  taken."  Ps.  ix. 
15,  16.  "  They  have  digged  a  pit  before  me,  into  the  midst  whereof 
they  are  fallen  themselves."  Ps.  Ivii.  6. 

We  should  infer  from  these  principles,  that,  in  the  ordinary  course  of 
Providence,  it  will  be  natural  to  expect  that  public  companies  will  receive 
their  rewards  or  punishments  as  the  result  of  their  own  actions.  And  this 
will  more  obviously  be  the  case  when  prosperity  is  bestowed  as  the  re- 
ward of  diligence,  righteousness,  or  prudence.  But  when  success  is  be- 
stowed as  the  reward  of  the  duties  of  religion  or  benevolence,  it  may  arise 
from  sudden  or  unexpected  causes.  At  the  same  time,  we  cannot  lay 
down  any  rules  for  the  Divine  procedure.  **  He  giveth  not  account  of 
any  of  his  matters."  Job  xxxiii.  13.  "  Hf  will  destroy  the  wisdom  of 
the  wise,  and  will  bring  to  nothing  the  understanding  of  the  prudent." 
1  Cor.  i.  19.  He  can  unlock  fresh  sources  of  prosperity,  or  open  new 
fountains  of  affliction  whenever  be  thinks  meet  to  do  so  for  the  moral 
discipline  of  his  intelligent  creation.  "  The  Lord  maketh  poor  and  mak- 
eth  rich  :  He  bringeth  low,  and  lifteth  up."  1  Sam.  ii.  7.  "  When  he 
giveth  quietness,  who  then  can  moke  trouble  ?  and  when  he  hidcth  his 
face,  who  then  can  behold  him,  whether  it  be  done  against  a  nation  or 
apWMt  a  man  only  ?  "  Job  Ixxxiv.  29.  With  regard  to  public  com- 
oanies,  as  well  as  individuals,  "  He  putteth  down  one,  and  setteth  up 
Another,  and  none  can  stay  his  hand,  or  say  unto  him,  What  doest 

420 


Moral  and  Religious  Duties. 

thou  ?  "  Ps.  Ixxv.  7  ;  Dan.  iv.  35.  But  though  "  clouds  and  darkness 
are  round  about  him,  yet  righteousness  and  judgment  are  the  habitation 
of  his  throne."  Ps.  xcvii.  2.  And  he  will  so  arrange  the  dispensations 
of  his  providence,  "  that  men  shall  say,  Verily,  there  is  a  reward  for 
the  righteous  ;  verily,  there  is  a  God  that  judgeth  IN  THE  EARTH."  Ps. 
Iviii.  11. 

IV.  The  effects  which  a  liability  to  these  rewards  and  punishments 
should  produce  on  the  conduct  of  public  companies. 

The  doctrine  we  have  endeavoured  to  establish  is,  that  public  compa- 
nies are  moral  agents,  capable  of  performing  good  and  evil  actions.  That 
those  which  perform  good  actions  will  be  rewarded,  and  those  which  per- 
form evil  actions  will  be  punished  ;  and  that  those  rewards  and  punish- 
ments will  consist  generally  in  an  increase  or  diminution  of  their  wealth. 
We  shall  now  notice  the  practical  application  which  public  companies 
may  make  of  this  doctrine. 

A  liability  to  be  rewarded  or  punished  according  to  their  works  should 
naturally  induce  public  companies  to  act  in  such  a  way  as  to  obtain  the 
reward  and  to  avoid  the  punishment.  This  is  to  be  done  by  performing 
the  duties  we  have  described.  Let  them  perform  the  duties  they  owe  to 
their  country,  and  to  those  with  whom  they  are  socially  related  ;  their  du- 
ties to  God  and  to  the  poor ;  and  they  may  hope  with  confidence  for  those 
blessings  which  are  promised  to  follow  the  performance  of  those  duties. 

1.  Public  companies  should  not  use  this  doctrine  uncharitably  in  the 
opinion  they  form  of  other  companies  which  are  not  so  prosperous  as 
themselves. 

Our  doctrine  does  not  teach  us  that  success  will  immediately,  in  all 
cases,  follow  the  performance  of  the  duties  we  have  described :  nor  that 
success  will  be  unchecked  or  unalloyed.  A  few  years  is  a  short  period 
in  the  history  of  a  public  company,  and  we  can  form  no  judgment  from 
so  short  a  period  of  its  ultimate  success.  Nay,  it  may  be  that  these  few 
years  of  struggle  and  difficulty  may  be  the  foundation  of  its  future  great- 
ness. We  should,  therefore,  judge  illogically  and  uncharitably,  were  we, 
from  the  temporary  distress  of  a  public  company,  to  infer  that  it  was  de- 
ficient in  the  performance  of  its  moral  and  religious  duties.  We  know 
enough  of  the  principles  of  the  Divine  government  to  be  able  to  regulate 
our  own  conduct,  but  not  enough  to  enable  us  to  pass  sentence  on  the 
conduct  of  others.  Luke  xiii.  1  -  5  ;  Acts  xxviii.  3-6. 

2.  Public  companies  should  not  envy  other  public  companies,  who  may 
have  neglected  their  moral  and  religious  duties,  and  yet,  for  a  time,  may 
enjoy  a  high  degree  of  apparent  prosperity. 

When  large  fortunes  are  suddenly  acquired  by  comparatively  slight 
deviations  from  the  path  of  rectitude,  even  virtuous  minds  arc  almost 
tempted  to  regret  their  own  purity,  and  to  exclaim,  "  Verily,  I  have 
cleansed  my  heart  in  vain,  and  washed  my  hands  in  innocency.  Behold 
the  ungodly,  who  prosper  in  the  world  ;  they  increase  in  riches."  Ps. 
Ixxiii.  12,  13.  But  we  are  cautioned  against  the  indulgence  of  this  dis-  * 
position. 

"  Fret  not  thvself  because  of  evil  doers,  neither  be  thou  envious  against  the  workers 
JJ  421 


A    Treat isf  on   Hanking. 

of  iniquity.     For  they  ihall  soon  be  cut  down  liko  the  ^ms-i,  ami  wither  ns  tln« 
barb.     Rwt  in  the  Lord,  and  wait  patiently  for  him  :  IV.  t  not  th\-elf  because  ot 
who  prtMpercth  in  hi*  war,  because  of  the  mitn  \\h«  l.rii..  •  paM. 

not  thrself  in  any  wi*e  t<>  <!.>  cut  .  i..r  ,-\il  «!... -is  >hall  In- <-ui  oil":  luu  those  that 
wait  •poo  the  Loni,  they  shall  inherit  tin-  earth     I  <  r  \ct  u  lutlc  while,  ami  i!..   • 
»hallnotbe:  yea,  thou  'shah  dili^.-sitly  «>n-i<l>  r  ln>  plaaa,sad  it  -luill  not  bo."    IV 
;t.  1-10. 

I  hare  Men  the  wicked  in  great  power,  and  spreading  himself  like  a  green  bay- 
tree.  Yet  be  paated  away.  and.  lo,  he  was  not :  yea,  I  sought  him,  hut  he  could  not 
bsftwnd."  PsTiMTii.  35, 36. 

3.  Let  those  public  companies  which  nre  not  successful  e\amh,e  the 
duties  WO  have  described.  one   \>\  one,  Mini   ascertain   if  they  have   per- 
formcd  them  all.    If  they  find  they  may  justly  be  charged  with  omissions, 

"  put  away  the  evil  of  your  doings ;  cease  to  do  evil  ;  learn  to  ii«. 
well;  seek  judgment,  relieve  the  oppressed,  judge  the  fatherless,  plead 
for  the  poor.  If  ye  be  willing  and  obedient,  ye  shall  eat  of  the  fruit  of 
the  land."  Isaiah  i.  16,  18,  19.  If  they  find  they  have  performed  all 
their  duties,  and  yet  are  not  successful,  let  them  not  "  be  wenry  in  well- 
doing, for  in  due  season  they  shall  reap,  if  they  faint  not."  Gal.  vi.  9. 

4.  Let  those  public  companies  which  are  prosperous  also  examine  how 
far  they  arc  chargeable  with  a  neglect  of  any  of  their  moral  or  religions 
duties.     "If  weighed  in  the  balance,  and  found  wanting"  (Dan.  v.  ~7), 
let  them  reflect  on  the  transient  nature  of  unmodified  prosperity. 

"  Behold,  these  are  the  unpodly,  who  prosper  in  the  world  ;  they  increase  in  riches. 
Surely  thou  didst  set  them  in  slippery  places:  thou  castctlst  them  down  into  destrnc- 
tioo.  How  are  they  brought  into  desolation  as  in  a  moment!"  IV  Ixxiii.  12,  18,  \<j. 

-  Lo,  this  u  the  man  that  mode  not  God  his  strength ;  but  trusted  in  the  ahunn 
of  his  riches,  and  strengthened  himself  in  his  wickedness.     God  shall  destroy  thee  for 
ever,  he  shall  take  thee  away,  and  root  thee  out  of  the  land  of  the  living."  IV  Hi.  5,  7. 

If  they  find  that  they  have  strictly  observed  the  duties  of  morality,  but 
neglected  those  of  religion  and  benevolence,  let  them  recollect  that,  al- 
though it  is  said,  "  To  do  justice  and  judgment  is  more  acceptable  to  the 
Lord  than  sacrifice  "  (Prov.  xxi.  3),  thus  intimating  that  morality  without 
religion  is  better  than  religion  without  morality,  yet  the  union  of  both  is 
essential  to  perfection  of  character  and  to  the  attainment  of  the  highest 
degree  of  prosperity.  If  they  have  received  those  blessings  which  are 
promised  to  the  exercised  of  diligence,  righteousness,  and  prudence,  let 
them  endeavour  to  obtain  those  also  which  are  promised  to  religion  and 
benevolence.  Let  them  not  allow  it  to  be  said,  that  though  u  diligent  in 
business  "  (Prov.  xxii.  29),  yet  they  have  not  "  diligently  followed  every 
good  work"  (1  Tim.  v.  10),  that  their  righteousness  refers  only  to  tem- 
poral affairs,  and  though  scrupulously  observant  of  the  rights  of  man,  yet 
they  have  been  unmindful  of  the  rights  of  God  (Deut.  xx.xii.  18) ;  that 
their  wisdom  is  only  the  wisdom  of  this  world,  and  not  the  wisdom  which 
cometh  from  above,  which  is  "  first  pure,  then  peaceable,  gentle,  and 
easy  to  be  entreated,  full  of  mercy  and  good  fruits"  (James  iii.  17) ;  and 
that  their  splendid  buildings  are  temples  devoted  to  the  service  of  Mam- 
moo  (Matt.  vi.  24),  from  whose  altars  no  sacrifices  of  thanksgiving  (Ps. 
cxvi.  17)  ascend  to  the  Must  High,  and  at  whose  gates  the  poor  and  the 
needy  stand  and  plead  in  vain.  (Deut.  xv.  7  ;  Luke  xvi.  21.) 

As  for  those  public  companies  that  have  performed  all  their  moral  and 

422 


Moral  and  Religioits  Duties. 

religious  duties,  and  have  obtained  all  the  promised  prosperity,  they  have 
only  to  indulge  in  the  pleasing  duties  of  gratitude  and  joy. 

"  Go  thy  way,  eat  thy  bread  with  joy,  and  drink  thy  wine  with  a  merry  heart,  for 
God  now  acceptetli  thy  works."  Eccles.  ix.  7. 

"  Because  the  Lord  thy  God  hath  blessed  thee  in  all  thy  increase,  and  in  all  the 
works  of  thine  hands,  therefore  thou  shalt  surely  rejoice."  Deut.  xvi.  15. 

"Peace  be  within  thy  walls,  and  prosperity  within  thy  palaces."    Ps.  cxxii.  7. 

It  affords  pleasure  to  God  (Ps.  xxxv.  27)  and  to  men  (Prov.  xi.  10 ; 
xxix.  2)  to  see  piety  and  virtue  in  a  state  of  prosperity. 

And  let  those  individuals  who,  from  their  talents,  their  wealth,  or  their 
position,  have  the  power  of  influencing  the  conduct  of  public  companies, 
recollect  they  are  responsible  for  the  exercise  of  the  influence  they  pos- 
sess ;  and  although  these  companies  will  cease  to  exist  with  the  present 
world,  yet  individuals  will  not.  And  those  who  from  Christian  motives 
may  cause  the  companies  with  which  they  are  connected  to  pay  higher 
attention  to  their  moral  and  religious  duties,  and  who  thus  shall  "  turn 
many  to  righteousness"  (Dan.  xii.  3),  may  expect  that,  after  they  have 
served  their  generation  (Acts  xiii.  36),  according  to  the  will  of  God,  they 
will  be  permitted,  through  Divine  grace,  to  join  the  COMPANY  of  angels, 
and  the  spirits  of  just  men  made  perfect  (Heb.  xii.  22,  23),  whose  names 
are  written  in  the  Lamb's  Book  of  Life.  Rev.  xxi.  27. 


A  Trtatitt  on  Bard-ing. 


Stcrioit  IX.  — TEN  MINUTES'  ADVICE  ABOUT  KEEPING  A 

BANKEB.* 


'  Hi  ttat  hMtrfceneth  unto  counsel  U  wife. "  —  PkovtKBi. 


1     \      MVER  is  a  man  who  has  on  open  shop  with  proper  counters, 
clerks,  and  books,  fur  receiving  other  people's  money  in  order  t. 
safe,  and  return  it  upon  demand. 

iie  building  or  shop  in  which  this  business  is  carried  on,  is  usually 
called  in  London  a  u  Banking-house,"  hut  in  Scotland,  and  in  tin-  country 
parts  of  England,  it  is  called  a  "  Bank."  The  word  "  bank  "  is  also  eni- 
>d  to  denote  the  partnership  or  company  who  carry  on  the  business 
of  banking.  Thus  we  say,  the  Bank  of  Scotland,  the  London  and  West- 
minster Hank,  the  Bank  of  Messrs.  Coutts  &  Co. 

M.   \Vlieu  a  company  of  this  kind  docs  not  consist  of  more  than  six 
partners,  it  is  called  a  "  Private  Bank"  ;  but  when  the  company  coi 
of  several  hundred  partners,  it  is  called  in  Scotland  a  "  Public  Bunk," 
and  in  England  a  "  Joint-stock  Bank." 

4.  A  private  bank  is  usually  managed  by  one  or  more  of  the  partners, 
and  all  the  partners  are  styled  hankers.     A  public  hank  is  managed  by  a 
principal  officer,  who  is  usually  styled  a  manager.     In  England  a  hank 
manager  is  not  commonly  called  a  banker ;  but  in  Scotland  all  managers 
of  banks,  and  managers  of  branch  banks,  are  called  bankers.     So  mind, 
when  I  use  the  word  "  banker,"  you  may  apply  it  to  either  a  private 
banker,  or  to  a  bank  manager,  whichever  you  please,  as  my  observations 
will  be  as  applicable  to  one  as  to  the  other.     A  banker  is  a  man  who  car- 
ries on  the  business  of  banking ;  and  whether  he  carries  it  on  upon  his 
own  account,  or  as  the  agent  of  a  public  company,  it  appears  to  me  to 
make  no  difference  as  to  his  claims  to  be  called  a  banker. 

5.  It  is  the  business  of  all  these  banks  to  receive  other  people's  money, 
and  to  return  it  upon  demand.     And  when  any  person  puts  money  into 
one  of  these  banks  he  is  said  to  open  an  account  with  the  bank  ;  and 
when  he  has  thus  opened  an  account,  and  continues  to  put  in  and  draw 
out  money,  he  is  said  to  have  a  current  account,  or,  in  London  phrus 

gy, "  to  keep  a  banker." 

6.  In  Scotland  almost  every  man  has  an  account  of  some  sort  with  a 
bank.     The  rich  man  in  trade  has  an  account  because  of  the  facility  of 

:'icting  his  operations;  the  rich  man  out  of  trade  has  an  account  be- 
cause  he  gets  interest  upon  his  lodgments,  and  he  keeps  his  money  in  the 
bank  until  he  has  an  opportunity  of  investing  it  elsewhere  at  a  better  rate 

•  I  puMiihed  this  Section  •eparatclr,  in  the  year  18.19,  nmlt-r  the  tide  of 
Minute*'  Advice  to  the  Middle  Claw  of  "Pco.  le  aliout  Kci-pin^  a  Udukcr.    liy  a  Prac- 
tical Banker.* 

•I'Ji 


Ten  Minutes'1  Advice. 

of  interest.  The  middle  class  of  people  have  an  account  because  of  the 
convenience  of  it,  and  because  they  obtain  the  discount  of  their  bills,  and 
perhaps  loans,  on  giving  two  sureties,  which  are  called  cash  credits.  The 
poorer  classes  lodge  their  small  savings  in  the  bank,  because  of  the  secu- 
rity, and  because  they  get  interest  on  the  sums  which  are  lodged. 

7.  But  in  London  the  practice  of  keeping  an  account  with  a  bank  is  by 
no  means  so  common  as  in  Scotland.     The  London  banks  are  banks  only 
for  the  rich.     The  bankers  require  that  every  person  opening  an  account 
shall  always  have  a  sum  to  his  credit ;  and  if  the  sum  thus  kept  is  not 
what  they  deem  sufficient,  they  will  close  the  account.     Hence  the  mid- 
dle class  of  people  in  London  have  no  banker  at  all,  and  the  poorer  class 
lodge  their  money  in  the  savings  banks,  where  they  get  interest,  which 
they  would  not  get  from  the  London  banker.     It  should  also  be  stated, 
that  besides  keeping  a  sufficient  balance,  a  party  opening  an  account  with 
a  London  banker  is  expected  to  give  a  certain  sum  every  year  to  the 
clerks.     This  is  called  Christmas  money,  and  the  object  is  merely  to  en- 
able the  banker  to  pay  a  less  salary  to  his  clerks,  at  the  expense  of  his 
customers. 

8.  But,  within  a  few  years,  public  or  joint-stock  banks  have  been  es- 
tablished in  London.     These  banks,  or  at  least  some  of  them,  will  allow 
you  to  open  an  account  without  promising  to  keep  a  large  balance,  or 
even  any  balance  at  all,  provided  you  pay  a  small  sum  annually  as  a  com- 
mission.    This  sum  is  fixed  when  you  open  the  account,  and  it  is  about 
the  same  that  you  would  be  expected  to  give  as  Christmas-money  to  the 
clerks  of  a  private  bank.     Hence  people  of  moderate  incomes,  and  those 
who  can  employ  the  whole  of  their  capital  in  their  business,  are  now  able 
to  keep  a  banker.     These  banks,  too,  give  interest  on  deposits,  whether 
the  sums  be  large  or  small,  as  I  shall  hereafter  explain. 

9.  The  first  public  or  joint-stock  bank  established  in  London  was  the 
London  and  Westminster  Bank.     This  bank  is  in  Lothbury,  and  it  has 
branch  establishments  at  No.  1  St.  James's  Square ;  No.  214  High  Hoi- 
horn  ;  No.  3  Wellington  Street,  Borough ;  No.  87  High  Street,  White- 
chapel  ;  and  No.  4  Stratford  Place,  Oxford  Street.     The  success  of  this 
bank  has  led  to  the  formation  of  several  others.     You  will  observe,  that 
all  banks  which  have  branches  conduct  their  business  on  the  same  terms 
at  the  branches  as  they  do  at  the  central  office. 

10.  Since,  then,  the  Scotch  system  of  banking  is  established  in  Lon- 
don, why  should  not  the  keeping  of  a  banker  be  as  general  in  London  as 
in  Scotland  ?     I  have  stated,  that,  under  the  old  system,  those  chiefly  who 
were  denied  banking  facilities  were  the  middle  class  of  people.     Now, 
these  people  may  be  subdivided  into  two  classes,  —  those  who  are  en- 
gaged in  trade,  and  those  who  are  not.     I  shall  address  myself,  in  the 
first  place,  to  the  former  class. 

11.  Now,  I  ask  you,  why  don't  you  keep  a  banker?     You  say  you 
have  been  in  business  several  years,  and  have  never  kept  one.    Of  course, 
if  no  banker  would  take  your  account,  you  could  not  do  otherwise ;  but 
now  there  are  bankers  willing  to  take  your  account.    But  you  say,  you  can 
do  without  a  banker.     Of  course  you  can.     The  question  is,  not  whether 
by  possibility  you  can  do  without  a  banker,  but  whether  you  cannot  do 

J  J  *  425 


7Vv<i.'iV 


<>tt 


better  with  one.  But  you  reply,  it  would  not  be  worth  nny  bank<  rN 
while  to  take  your  account  That  U  fur  his  consideration,  not  for  yours. 
The  question  fur  you  to  divide  is  not  whether  your  keeping  a  bunker 
would  be  of  use  to  him,  but  whether  it  would  be  of  use  to  yourself.  I 
shall  point  out  to  you  some  of  the  advantages. 

PJ.  In  tin-  first  place,  by  keeping  a  banker  your  money  will  be  lodged 
in  a  place  of  security.  You  have  now  £50  or  £  100,  or  perhaps  some. 
time*  jf'JOO,  that  you  keep  in  your  own  house  ;  you  take  it  up  into  your 
bedroom  at  night,  and  when  you  go  out  on  Sunday  you  carry  it  in  your 
pocket  Now,  you  may  lose  this  money  out  of  your  pocket,  the  till  may  be 
robbed  by  your  servants,  or  your  house  may  be  broken  open  by  thieves, 
or  your  premises  may  take  fire  and  the  money  may  be  burnt.  Hut  even 
should  you  escape  LOSS,  you  cannot  escape  ANXIETY.  When  you  have  a 
little  more  inon-  y  than  usual,  you  have  fears  and  apprehensions  lest  some 
accident  should  occur.  Now,  you  will  avoid  all  this  trouble  by  keeping  a 
banker. 

\'<\  The  banker  will  not  only  take  care  of  your  money,  but  also  of  any 
thing  else  you  commit  to  his  charge.  You  can  get  a  small  tin  box  with 
your  name  painted  on  it,  and  into  this  box  you  can  put  your  will,  the 
lease  of  your  house,  policies  of  insurances,  arid  any  deeds  or  other  docu- 
•s  that  require  particular  care.  You  can  send  this  box  to  your 
banker,  who  will  take  care  of  it  for  you ;  and  you  can  have  it  hack 
whenever  you  like,  and  as  often  as  you  like.  If  your  premises  are  in- 
sured, it  is  clearly  improper  to  keep  the  policy  on  the  premises  :  for  if  the 
house  be  burnt,  the  policy  will  be  burnt  too;  and  where  then  is  your  evi- 
dence of  claim  upon  the  insurance  office  ? 

14.  Another  advantage  is  the  saving  of  time.     When  you  rrreivr 
money  you  will  send  it  in  a  lump  to  the  bank  ;  and  when  you  pay  away 
money  you  will  draw  cheques  upon  the  bank.     Now  to  draw  a  cheque 
takes  up  much  less  time  than  counting  out  the  money  that  you  have  to 
pay,  and  perhaps  sending  out  for  change  because  you  have  not  the  exact 
sum.     Besides,  you  sometimes  hold  bills  which,  when  due,  you  have  to 
send  for  payment ;  now  you  can  lodge  these  with  your  banker,  who  will 
present  them  for  you.     And  when  you  accept  bills,  you  will  make  them 
payable  at  your  banker's,  instead  of  making  them  payable  at  your  own 
house.     Now  in  all  these  coses  there  is  a  great  saving  of  time  ;  an<  . 
•idea,  your  bills,  from  being  made  payable  at  a  bank,  will  be  convden  >i 
more  respectable. 

15.  Another  advantage  of  keeping  a  hanker,  is,  that  it  will  be  a  check 
upon  your  accounts.     I  need  not  speak  to  you,  as  a  trader,  of  the  impor- 
tance of  correct  accounts.     Your  banker's  book  will  be  an  authentic  P  ••- 
ord  of  your  cash  transactions.     If  you  make  a  mistake  in  your  trade 
books,  the  banker's  book  will  often  lead  to  a  detection  of  the  error.     If 
you  have  paid  a  sum  of  money,  and  the  party  denies  having  received  it, 
you  can  refer  to  your  banker's  account,  and  produce  your  cheque,  \\  hieh 
is  as  good  as  a  receipt    By  means  of  a  banker's  account,  you  could  i 
your  receipts  and  payments,  even  after  a  number  of  years  had  elir, 
and  hence  disputed  accounts  could  be  readily  adjusted,  and  error, 

from  forgctfulness  or  oversight,  be  speedily  rectified. 


f 

Ten  Minutes'  Advice. 

16.  I  could  mention  several  other  reasons  why  you  should  keep  a 
banker.*     But  what  I  have  said  will  be  enough  to  induce  you  to  make  a 
trial ;  and  when  you  have  once  opened  an  account,  you  will  find  so  much 
convenience  from  it,  that  you  will  require  no  further  reasons  to  induce 
you  to  continue  it.     If  it  should  not  answer  your  expectations,  you  can, 
whenever  you  please,  close  it  again. 

17.  Now,  then,  as  you  have  made  up  your  mind  to  keep  a  banker,  the 
next  thing  is  to  determine  at  what  bank  you  will  open  your  account.     On 
this  point  I  must  leave  you  to  make  your  own  choice.     All  the  PUBLIC 
BANKS  issue  prospectuses,  containing  a  list  of  their  directors,  the  amount 
of  their  paid-up  capital,  the  names  of  the  bankers  who  superintend  their 
respective  establishments,  and  their  rules  for  transacting  business.     You 
can  get  a  prospectus  from  each  bank,  compare  them  together,  and  please 
your  own  fancy.     But  if  you  have  no  other  grounds  for  preference,  I  ad- 
vise you  to  open  your  account  with  the  BANK  or  BRANCH  BANK  that  is 

NEAREST  TO  YOUR  OWN   PLACE  OF    BUSINESS.       You  will    often   have   to   go 

or  send  to  the  bank,  and  if  it  be  a  great  way  off,  much  time  will  be  lost, 
and  you  will  at  times  be  induced  to  forego  some  of  the  advantages  of  keep- 
ing a  banker  rather  than  send  to  so  great  a  distance.  On  this  account, 
let  your  banker  be  your  neighbour.  Recollect,  time  is  money. 

18.  There  is  no  difficulty  in  opening  an  account.     You  will  enter  the 
bank,  and  ask  for  the  manager.     Explain  to  him  what  you  want  to  do. 
He  will  give  you  every  information  you  may  require,  and  you  will  re- 
ceive, without  charge,  a  small  account  book  called  a  Pass-book,  and  a 
book  of  cheques.    I  advise  you  to  keep  these  two  books,  when  not  in  use, 
under  your  own  lock  and  key. 

19.  You  now  require  no  further  advice  from  me,  as  your  banker  will 
give  you  the  most  ample  information  respecting  the  way  of  conducting 
your  account.     Nevertheless,  I  may  mention  a  point  or  two  for  your  own 
government:  —  Do  not  depend  entirely  upon  your  banker's  Pass-book, 
but  keep  also-  an  account  in  a  book  of  your  own.     Debit  your  banker 
with  all  cash  you  may  pay  into  the  bank,  and  credit  him  for  all  the 
cheques  you  may  draw  at  the  time  you  draw  them.     Send  your  Pass- 
book frequently  to  be  made  up  at  the  bank  ;  and  when  it  returns,  always 
compare  it  with  your  account-book.     This  will  correct  any  mistake  in  the 
Pass-book.     Besides  some  of  your  cheques  may  not  be  presented  for  pay- 
ment until  several  days  after  tfiey  are  drawn;  and  if,  in  the  mean  time, 
you  take  the  balance  of  the  banker's  Pass-book,  you  will  seem  to  have 
more  ready  cash  than  you  actually  possess,  and  this  may  lead  you  into 
unpleasant  mistakes. 

20.  When  you  lodge  any  money  at  the  bank,  always  place  the  total 
amount  of  the  cash  and  your  name,  at  full  length,  upon  the  outside  of  the 
parcel,  or  on  a  slip  of  paper.     The  cashier  will  then  see  at  once  if  he 
agrees  with  your  amount.     This  will  save  time,  and  prevent  mistakes. 

21.  Be  always  open  and  straightforward  with  your  banker.     Do  not 

*  The  reasons  assigned  here  have  a  reference  chiefly  to  London  banking  The  ope- 
rations of  country  hanking  are  familiarly  described  in  "  The  Anatomy  and  Philosophy 
of  Banking;  or,  the  True  Character  and  Value  of  Banks  briefly  explained  to  the 
Middle  Classes  of  Society.  By  James  Stradian."  (Groombridge,  publisher.) 

427 


.' 

represent  yourself  to  be  a  richer  man  than  you  :> 

r  banker  any  bills  that  are  not  likely  t.>  be  ri-.vn:.\i.i.Y  paiii  uli.-n 
dm» ;  and  should  tiny  !•<•  uii|>aid   :i:..i   returned   to  \uu.  pa\ 
l*y.  '  .nt  ;    ilia! 

draw  cheques  ii(i<»n  your  haul. IT  for  •••  m«.in  y  than  ymi  have  in  his 

hand*.  Without  fint  asking  ItM  OOnaent  j   ami    if  \on    inak<-   him  any  prom- 
ises, be  sure  that  they  be  str..  med.     If  you  fail  O.M-K,  tin;  l>ank- 

•  -:!a!e  l«  :  .stS  yOU  8J.'. 

23.  Should  you  bo  dissatisfied  with  any  tiling  connected  with   yon: 

>.-nr  complaint  to  the  BA-. 

ill  your  communications  be  made  in  rr.Kso.v,  rather  than  l.\  u 
But  do  not  stay  long  at  one  inters  u.      Make  n«i  observations  atM>ut  the 
weather  or  the  news  of  the  day.     Proceed  at  once  t<>  tin-  hi. 
are  come  about,  ami  when  it  is  settled,  retire.     This  will  save  your  Lmk- 
.  and  give  him  a  favorable  impression  of  your  character  as  a  man 
of  business. 

•    If  you  are  in  partnership,  besides  opening  an  account  with  your 
banker  in  the  names  of  the  firm,  you  should  open  a  private  account   fur 

••self,  that  your  personal  a  flairs  may  be  kept  separate   from  tlm 
the  partnership.     Or   if  you   are.   in  an  r\  i   business,  and 

have  a  large  family,  it  is  advisable  that  you  open  a  n  •  with 

your  banker  in  the  nam«-  of  your  \sife,  that  your  trade  payments  am: 
house  ho!  .  may  not  be  mixed  up  together   in   the  >ame   aeeoiin'. 

I  is  a  good  way  of  ascertaining  the  exact  amount  of  your  fam 
penditure. 

v!l.   If  you  are  appointed  executor  or  a«ii_rn< •••  '"  an  e>tate,  or  Ix'c.ome 
treasurer  to  a  public  institution  i^r  e!:aritah!e  si.eii-t\.  •  ;-arate  ac- 

count with  your  banker  for  this  oilier,  and  do  rot  mix  other  people's 
moneys  with  your  own.     This  will  prevent   m  <1  confusion    in 

your  accounts.     These  separate  a  my  !•••  I:"pt  still  more  <i 

by  being  opened  with  another  banker,  or  at  another  branch  of  the 
bank. 

25.  There  are  a  good  many  of  the  middle  class  of  people  who  are  not 
in  trade,  and  I  must  now  address  them.     Perhaps  you  are  a  c!< .-n:\man, 
or  a  medical   man,  or  you  ore  in  a  public  office,  or  are  living  on  your 
rents  or  dividends.     At  all  events,  whatever  you  may  be,  I  conclude  you 
are  not  living  beyond  your  means.     If  you  are,  I  have  not  a  word  to  say 

.  in  about  keeping  a  banker;  you  will  soon,  most  likely,  be  within  the 
keeping  of  a  gaoler. 

26.  Several  of  the  reasons  I  have  given  to  the  trader  will  also  apply  to 
you;  but  there  is  one  that  applies  with  much  jjna-.r  force,  —  the  ten- 
dency to  insure  accurate  accounts.     As  you  are  not  a  man  of  business, 
(  shall  not  advise  you  to  keep  an  account  of  your  receipts  ami  your  ex- 
penditure.    I  know  you  will  do  no  such  thin  jr.     Should  yon  ever  com- 
mence to  do  so,  you  will  get  tired  before  the  end  of  the  year,  ami  throw 
the  book  aside.     Now,  if  you  keep  a  banker,  ho  will  keep  your  accounts 
for  you;  his  Pass-book  will  show  you  the  state  of  your  All 
the  money  you  receive  you  must  send  to  the  bank,  and  all  your  payments 
must  be  made  by  cheques  upon  the  bank.     If  you  want  pock 


Ten  Minutes'1  Advice. 

draw  a  cheque  for  £  5  or  £  10,  payable  to  cash,  but  by  no  means  dis- 
burse any  money  but  through  your  banker.  Your  book  will  be  balanced 
every  half-year.  You  will  then  see  the  total  amount  of  your  receipts  dur- 
ing the  half  year,  and  your  various  payments  to  the  butcher,  the  baker, 
the  tailor,  &c.  The  names  to  which  the  cheques  are  made  payable  will 
show  you  for  what  purpose  they  were  given ;  and  you  should  write  these 
names  in  a  plain  hand,  that  the  clerks  may  copy  them  correctly  in  the 
Pass-book.  Now,  if  you  look  through  your  book  once  every  half  year 
in  this  way,  you  will  probably  see  occasion  to  introduce  some  useful  re- 
forms into  your  domestic  expenditure.  But  if  you  are  too  lazy  to  do  this, 
land  the  book  to  your  wife,  and  she  will  do  it  for  you. 

27.  I  shall  now  address  another  class  of  people.  Perhaps  you  are  a 
clerk,  or  a  warehouseman,  or  a  shopman,  or  a  domestic  servant.  Well, 
yoa  have  no  occasion  to  keep  a  banker ;  that  is,  you  have  no  occasion  to 
open  a  current  account.  But  you  have  got  a  little  money  which  you 
would  like  to  put  into  a  safe  place,  and  upon  which  you  would  like  to  re- 
ceive interest.  Well,  now,  listen  to  me. 

26.  If  the  sum  be  under  £  10,  or  if  the  sum  be  above  £  10,  and  you 
are  not  likely  to  want  it  soon,  put  it  into  the  savings  banks ;  you  will  re- 
ceive interest  for  it  at  the  rate  of  about  £  3  for  every  £  100  for  a  year. 
But  mind,  you  can  only  put  money  into  the  savings  bank  at  certain  hours 
in  the  week,  when  the  bank  is  open ;  and  you  cannot  put  in  more  than 
=€30  in  any  one  year,  nor  more  than  =£150  altogether,  and  you  will  re- 
ceive no  interest  for  the  fractional  parts  of  a  month,  and  you  cannot  draw 
out  any  money  without  giving  notice  beforehand. 

29.  If,  then,  your  money  is  more  than  £  10,  and  you  have  already 
lodged  £  30  this  year  in  the  savings  bank,  or  £  150  altogether,  or  if  you 
will  have  occasion  to  draw  out  your  money  without  giving  notice,  then 
lodge  it  in  one  of  the  public  banks.     These  banks  are  open  every  week 
day  from  nine  o'clock  in  the  morning  till  four  in  the  evening ;  they  will 
take  lodgments  of  money  to  any  amount,  and  interest  will   be  allowed 
from  the  day  it  is  lodged  until  the  day  it  is  drawn  out ;  and  if  the  sum  is 
under  £  1,000,  no  notice  is  required.    For  all  sums  lodged  on  interest  the 
bankers  give  receipts  called  deposit  receipts. 

30.  When  you  go  to  the  bank  to  lodge  upon  interest  any  sum  under 
£  1,000,  you  need  not  inquire  for  the  manager.     Hand  your  money  to 
any  clerk  you  may  see  standing  inside  the  counter,  and  ask  for  a  deposit 
receipt.    You  will  be  requested  (the  first  time  you  go)  to  write  your  name 
and  address  in  a  book  which  is  kept  for  that  purpose,  and  then  the  deposit 
receipt  will  be  given  to  you  without  any  delay. 

31.  Mind,  this  deposit  receipt  is  not  transferable;  that  is,  you  cannot 
lend  it  or  give  it  to  any  body  else.     When  you  want  the  money,  you  must 
take  it  yourself  to  the  bank,  and  ask  the  cashier  to  pay  you  the  amount. 
You  will  then  be  requested  to  write  your  name  on  the  back  of  the  deposit 
receipt ;  the  cashier  will  see  that  the  signature  corresponds  with  the  signa- 
ture you  wrote  in  the  book  when  you  lodged  the  money,  and  will  then 
pay  you  the  amount,  and  keep  the  receipt. 

32.  Although  you  cannot  lodge  upon  a  deposit  receipt  a  less  sum  in  the 
first  instance  than  £  10,  yet,  havinjj  lodged  that  sum,  you  can  make  any 


A   TVftrtiM  on  Banking. 


additions  to  it  you  please.  Thus,  if  you  wish  to  lodge  £  5  more,  you  cnn 
take  your  £5  note  and  your  deposit  receipt  for  £  10  to  the  l-.-mk,  and  get 
a  new  receipt  for  £  15.  If,  after  having  lodged  £  10,  you  wish  tu  lodge 
£  10  mor  n  get  a  separate  receipt  for  the  second  £  10,  or  have  a 

new  receipt  for  .*' »0,  whichever  you  please  ;  and,  observe,  whenever  any 
»'!.iition  is  made  to  a  former  receipt,  the  old  receipt  is  cancelled,  and  the 
•-;  due  upon  it   is  either  paid,  to    you   in    money,  or  added  to  the 
amount  of  the  new  receipt,  as  may  be  most  agreeable  to  yourself. 

:  The  interest  allowed  you  l>y  tlie  bank  will  at  present  be  at  the  rate 
of  2  per  cent ;  that  is  to  say,  after  the  rate  of  £2  upon  every  £  100  for 
a  year. 

84.  Upon  sums  above  £  1,000  the  interest  allowed  is  sometimes  more 
•times  leas  than  2  per  cent.,  according  to  the  value  of  money, 
that  is,  according  to  the  rate  at  which  the  hankers  can  employ  it  agtui  ; 
and  a  few  days1  notice  is  usually  required  before  the  money  is  withdravn  ; 
but  upon  sums  under  £  1,000  the  rate  of  interest  varies  less  frequently, 
and  they  are  always  repayable  upon  demand. 

:t.~i  ^  -a  \\ill  be  surprised  to  find  how  the  desire  of  lodging  money  in  a 
bank  will  grow  upon  you.  When  you  had  the  money  in  your  pocket,  you 
were  anxious  to  find  reasons  for  spending  it.  When  you  have  placed  it 
in  the  bank,  you  will  be  anxious  to  find  reason?  for  not  spending  it  All 
habits  are  formed  or  strengthened  by  repeated  acts.  The  more  money 
you  lodge  in  the  bank,  the  more  you  will  desire  to  lodge.  You  will  go 
>n  making  additions,  until,  at  last,  you  will  probably  have  acquired  a  sum 
that  shall  lay  the  foundation  of  your  advance  to  a  higher  station  in 
society. 


430 


Indf.x  Reading. 


SECTION  X.  — INDEX  READING. 

THIS  book  is  now  brought  to  a  close.  Our  aim  has  been  to  put  into 
It  such  matters  as  shall  be  practically  useful.  We  have  endeavoured  to 
render  it  more  useful  by  making  an  Index.  We  shall  now  point  out  the 
uses  of  this  index. 

By  means  of  an  index  we  can  refer  to  any  thing  that  we  remember  to 
have  read.  This  facility  of  reference  is  a  great  advantage.  Without 
it  we  may  have  to  make  a  long  search,  and  to  read  over  a  good  many 
pages,  before  we  find  the  page  we  want.  An  index  is  also  useful  in  ena- 
bling us  to  call  to  mind  those  parts  of  a  book  that  we  have  forgotten. 
After  having  read  through  a  book,  if  we  read  through  the  index  we  shall 
be  reminded  of  parts  that  would  otherwise  have  escaped  our  recollection. 
And  if  we  continue  an  occasional  perusal  of  the  index,  we  shall  impress 
the  whole  substance  of  the  book  on  our  memory.  An  index  will  often 
bring  together  those  parts  of  a  book  in  which  the  same  subject  is  discussed, 
and  thus  we  shall  obtain  a  fuller  knowledge  of  the  subject  in  all  its  bear- 
ings and  relations  than  we  should  obtain  by  our  reading  without  the  index. 
An  index  may  be  employed  as  a  means  of  self-examination.  If  the  index 
does  not  suggest  to  the  mind  of  a  party  the  main  ideas  to  which  it  refers, 
he  must  have  read  the  book  very  inattentively,  and  he  has  yet  more  to 
learn  respecting  the  subject  discussed.  The  index  will  thus  be  a  test  of 
his  attainments.  To  render  the  index  more  useful  in  this  respect,  I 
have  made  some  of  the  references  in  an  interrogative  form.  The  index 
may  thus  be  made  to  serve  the  purpose  of  a  catechism.  I  advise  the 
young  student  in  practical  banking  to  endeavour  to  answer  these  questions 
without  referring  to  the  book,  and  to  answer  them  aloud.  By  this  means 
he  will  impress  the  matter  more  deeply  on  his  mind,  and  at  the  same 
time  acquire  a  facility  of  expression. 

An  index  may  be  rendered  useful,  not  to  those  only  who  have  read  the 
book,  but  to  those  who  have  not  read  it,  and  who  never  will  read  it.  The 
index  contains  a  syllabus  of  the  work.  Under  a  single  word  is  sometimes 
placed  a  summary  of  the  facts  and  principles  of  a  whole  section.  We 
may  thus  become  acquainted  with  the  substance  of  a  book  in  a  short  space 
of  time.  It  is  true  that  in  this  railway  mode  of  obtaining  knowledge  we 
must  forego  any  gratification  that  might  arise  from  the  style  or  the  illus- 
trations. But  the  exercise  would  be  profitable.  In  this  way  reviewers 
and  others  are  able  to  acquire  a  good  knowledge  of  a  book,  and  to  form 
a  fair  opinion  of  its  merits,  without  reading  many  pages  consecutively. 
But  without  an  index  this  cannot  be  done,  either  so  well  or  so  rapidly. 
Intelligent  men  do  not  wish  to  read  through  a  large  book  on  a  subject  with 
which  they  are  pretty  well  acquainted.  They  desire  to  refer  to  those 
ooints  only  on  which  their  own  information  may  be  deficient,  or  on  which 

431 


A  TVeotiM  on  Banking. 

they  would  desire  to  know  the  sentiments  of  the  author.  This  they  can 
easily  do  by  means  of  on  index.  Men  in  business,  too,  must  husK-md  their 
time,  and  they  can  afford  to  read  only  those  parts  of  a  book  \\hi.-h  tl .. •> 
deem  the  moat  interesting.  They  may  he  guided  to  those  parts  by  means 
of  an  index. 

Tin-re  are  certain  states  of  body  and  of  mind  in  which  u  man  is 
not  disposed  for  continuous  reading.  At  such  a  time  it  is  r« Tn -sh- 
ing  to  saunter  over  an  index.  Some  word  may  catch  the  eye,  or  s<>m< 
new  idea  be  excited  in  the  mind,  ami  the  faculties  may  be  at  once  enliv- 
ened and  invigorated.  In  this  kind  of  intellectual  loitering  we  may 
chance  pick  up  in  our  path  a  (lower  or  a  pebbh-th.it  shall  awakm  tin- 
spirit  of  inquiry,  set  in  motion  our  powers  of  investigation,  and  lead  the 
mind  into  a  course  of  agreeable  and  profitable  meditation. 


432 


Appendix. 


APPENDIX. 

THE  following  paragraphs  were  omitted  :  — 

To  the  statement  of  the  affairs  of  the  bank  at  page  173,  add  the  follow- 
ing note  :  — 

Those  joint-stock  banks  that  have  branches  make  out  a  similar  statement  every  week. 
It  comprises  the  balances  of  the  General  Ledger  at  the  head-office,  and  of  that  of  each 
branch.  The  balance-sheets  are  printed,  and  are  bound  together  beforehand,  so  as  to 
form  a  book  ;  it  is  called  the  Statement  Book,  and  is  laid  before  the  directors  at  their 
weekly  meetings. 

Add  the  following  to  the  end  of  the  section  at  page  183  :  — 

A  balance-sheet  of  the  affairs  of  a  commercial  house  is  made  out  in 
much  the  same  way  as  that  ef  a  bank.  The  liabilities  are  placed  on  one 
side  of  the  account,  and  the  assets  on  the  other.  The  items  of  which 
each  side  is  composed  will  vary  according  to  the  nature  and  extent  of  the 
business.  Many  commercial  balance  sheets  have  unfortunately  been 
recently  brought  under  the  notice  of  the  public  ;  most  of  them,  as  well  as 
the  annual  balance-sheets  of  some  of  the  joint-stock  banks  may  be  found 
in  the  pages  of  the  Bankers'1  Magazine. 

THE  BANK  OF  FRANCE. 

The  following  evidence  was  given  by  the  late  Lord  Ashburton,  before 
the  Committee  of  the1  House  of  Lords  on  Commercial  Distress  in  1848  :  — 

"  Have  you  any  statement  which  you  are  desirous  of  making  to  the 
committee  of  information  received  by  you  relative  to  the  proceedings  of 
the  Bank  of  France  ? 

"  Having  observed  that  the  committee  were  desirous  of  knowing  some- 
thing about  the  construction  of  the  direction  of  the  Bank  of  France,  and  of 
the  conduct  of  that  bank  with  respect  to  the  several  circumstances  which 
have  been  matters  of  inquiry  here  connected  with  the  Bank  of  Eng- 
land, I  took  the  opportunity  of  making  inquiry  of  a  gentleman  who  was  in 
London  about  ten  days  ago,  who  was  a  director  of  the  Bank  of  France, 
and  who  would  readily  have  come  and  given  evidence  himself  if  he  had 
no  tbeen  under  the  necessity  of  immediately  returning  to  his  own  country. 
The  inquiry  I  made  of  that  gentleman  related,  first  of  all,  to  the  constructipn 
of  the  direction  of  the  Bank  of  France,  and  to  what  extent  that  direction 
was  considered  to  work  well.  Then  I  made  inquiry  upon  some  of  the 
points  more  immediately  connected  with  the  subject  of  our  inquiries, 
namely,  the  conduct  of  the  Bank  of  France  with  respect  to  its  discounts, 

K  K  433 


A  Treatise  on  Banking. 

with  respect  to  the  charge  ut  and  with  respect  to  any  limitation 

or  regulation  that  may  !><•  put  upon  tin*  o|>enitions  of  tin-  hank  analogous 
In  those  wliirh  an-  imposed  upon  tin-  transactions  of  our  own  lunik.  I 
will  first  of  all  state  to  the  committee  the  facts  with  revp.-.-t  to  the.  con- 
struction of  the  bank  direction.  Thr  Mank  of  France,  as  prohahly  most 
of  your  lordships  know,  has  ;nco.  1803;  it  was  estahlished  quite 

at  the  beginning  of  the  power  of  Napoleon,  and  is  constituted  to  this 
day  under  the  same  administration  ;  and  I  think  it  may  he  stated, 
that  under  nil  the  different  variations  of  government,  and  the  difficulties 
through  which  that  country  hat  passed,  the  management  of  the  kink  has 
been  singularly  successful  and  fortunate.  There  has  been  at  no  time  any 
suspension  of  its  payments  or  any  material  difficulties  of  any  kind  ;  and 
it  seems  to  have  answered  perfectly  well  the  object  for  which  that  hank, 
like  our  own,  was  instituted,  namely,  as  a  bank  to  give  proper  facilities  to 
the  circulation  and  commerce  of  the  country,  and  at  the  same  time  to 
be  the  bankers  of  the  Government,  and  to  give  every  proper  and  legiti- 
mate facility  to  the  operations  of  the  Government.  The  direction  is 
formed  in  this  manner  :  There  is,  first  of  all,  a  governor,  who  has  a  house 
and  60,000  franca  a  year.  There  are  then  two  sub-governors,  each  with 
30,000  francs  a  year.  The  governor  and  sub-governors  arc  both  named 
by  the  Government,  and,  it  is  understood,  removable  by  the  Government, 
but  in  point  of  fact  they  never  are  removed.  The  present  governor, 
Monsieur  D'Argout,  is  the  third  governor  of  the  Bank  of  France  in  forty- 
five  years;  so  that  it  has  been  generally  considered  that,  though  legally 
removable  by  the  Government,  practically  they  have  not  been  removed 
Then,  besides  this  governor  and  two  sub-governors,  there  are  three  re- 
ceivers-general. Your  lordships  are  probably  aware  what  the  position  of 
receivers-general  is  in  the  financial  economy  of  France.  Those  three 
receivers-general  are  selected  by  the  proprietors  out  of  the  class  of  the 
receivers-general ;  but  the  receivers-general  are  naturally  more  or  less 
connected  with  the  Government  and  finance  department  of  the  country. 
There  are  then  three  censors,  who  are  to  be  elected  from  the  *  Etnt  In- 
dustrie! '  of  Paris,  —  what  we  should  call  the  manufacturers  of  Paris. 
It  is  so  regulated  by  the  charter  that  they  must  be  taken  from  that  class 
of  persons ;  but  although  they  are  called  censors,  I  do  not  find  that  they 
have  to  perform  any  duty  in  the  direction  but  the  same  which  is  performed 
by  the  other  directors.  Then  in  addition  to  those  there  are  twelve  ordi- 
nary directors,  elected  in  the  way  in  which  our  bank  directors  are  elected. 

44  Arc  the  directors  generally  paid  ? 

"  None  of  them  are  paid  but  the  governor  and  the  two  sub-governors, 
except  that  there  is,  I  think,  ten  francs  paid  upon  each  attendance,  mere- 
ly for  the  purpose  of  marking  the  attendance  of  persons  to  their  duty,  but 
no  amount  of  payment  that  can  be  of  any  importance.  The  twelve  di- 
rectors are  taken  from  the  body  of  merchants,  bankers,  and  leading  per- 
sons at  Paris,  at  the  discretion  of  the  stockholders.  That  is  the  constitu- 
tion of  the  Bank  of  France.  Upon  making  inquiry  of  the  gentleman  I 
have  mentioned  as  to  the  system  of  management,  he  told  me  that  the  real 
detail  of  the  management  of  the  bank  is  mainly  with  the  two  sub-govern. 

434 


The  Bank  of  France. 

ors.  They  are  stated  to  be  very  able  men,  thoroughly  acquainted  with 
all  the  circumstances  of  Paris,  and  all  the  persons  likely  to  come  to  the 
bank  for  business.  And,  in  short,  upon  them  seems  to  devolve  mainly 
the  duty  of  attending  to  the  details  of  the  management  of  the  bank  ;  and 
the  directors  themselves  seem  to  be  more  checks  upon  those  sub-govern- 
ors, than  to  be  themselves  the  managers  of  the  bank.  At  the  same  time 
the  directors  have  the  power,  which  the  directors  of  our  bank  have,  to 
vote  and  to  decide  upon  any  measures  that  are  before  them.  This  gen- 
tleman stated  to  me  that  he  considers  the  system  to  work  well ;  that  there 
is  no  complaint  of  it.  He  does  not  find  that  the  governor  and  sub-gover- 
nors pursue  any  interests  of  the  Government  as  against  those  of  the  bank 
and  of  trade,  and  the  power  which  they  have  with  the  directors  is  a  suffi- 
cient check  ;  in  short,  that  they  have  nothing  material  to  complain  of  in 
the  administration.  So  much  for  the  direction  of  the  bank.  Then  I  pro- 
ceeded to  inquire  upon  several  points  relating  to  the  management  of  the 
affairs  of  the  bank  ;  and  first  as  to  the  charge  of  interest.  The  legal  in- 
terest in  France  is  6  per  cent,  for  moneyed  securities,  and  5  per  cent,  for 
land.  It  is  limited,  as  the  interest  of  this  country  is  limited,  to  5  per 
cent,  for  mortgages  upon  land,  and  6  per  cent,  as  the  maximum  of  legal 
interest  for  any  purpose.  The  transactions  of  the  Bank  of  France  may 
be  said  to  have  varied  very  little  indeed  from  the  limits  of  4 to  5  percent.; 
they  never  exceed  5,  and  they  have  hardly  ever  been  under  4.  Un- 
der all  circumstances,  they  have  kept  that  equable  rate  of  interest  for 
their  discounts  and  for  their  general  transactions.  I  should  state  that  the 
discounts  of  commercial  paper  by  the  Bank  of  France,  so  far  from  being 
insignificant,  as  has  been  intimated,  are  in  reality  very  large.  I  take  it 
that  upon  the  average  of  years  the  discount  of  commercial  paper  by  the 
Bank  of  France,  is  larger  than  the  discount  of  commercial  paper  by  the 
Bank  of  England.  They  make  no  distinction  between  any  qualities  of 
paper  ;  all  paper  is  done  at  the  same  rate ;  but  they  rather  favor  what 
they  call  the  paper  connected  with  the  common  trade  of  the  place. 
Therefore  a  much  larger  portion  of  their  discounts  is  in  small  bills  in  the 
regular  trade  of  the  place,  upon  which  this  gentleman  says  the  loss  was 
very  insignificant  indeed  ;  that  paper  usually  having  three  signatures  upon 
it,  and  being  founded  upon  real  business,  is  very  seldom  attended  witli 
any  loss.  What  I  have  stated  with  respect  to  the  interest  that  the  Bank 
of  France  charge  is  in  answer  to  a  further  question  which  I  put,  whether 
they  regulated  the  amount  of  their  discounts  at  all  by  demanding  a  high- 
er rate  of  interest,  as  our  bank  has  done  of  late  years.  He'  says  they 
have  not  done  that  on  any  occasion  ;  that  the  rate  has  remained,  as  I  have 
stated,  uniform,  —  between  4  and  5  per  cent.,  —  and  they  never  attempt 
to  lessen  the  applications  by  asking  a  larger  rate  of  interest. 

"  Have  they  any  legal  minimum  of  interest  ? 

"  No  ;  they  have  no  legal  minimum  of  interest ;  but  when  the  inter- 
est comes  down  very  low  they  consider  that  a  symptom  that  bank  ac- 
commodation is  not  required. 

"  Though  they  do  not  alter  the  rate  of  interest,  do  not  they  vary  from 
time  to  time  the  rules  with  respect  to  the  echeance  of  bills  ? 

435 


A  Trtalise  on  Banking. 

i'hnt  I  cannot  state.     Then  IK-  <-at.'d  further  that  I..-  1,  ,,v 

,\:    any  time  of  their  refinum   tin-  common   trade   bills  nf  tin-  conn- 
to  regulate  the  state  of  their  a  Hairs  they  do  it   by  in- 
creasing or  diminish  m;.'  what  tin  y  may  hold  nf  public  securities,  hut 
never  reduce  or  materially  vary  their  transactions  with  the  merdmi, 
the  « 

•     I'hen  in  what  sense  rim  they  be  said  to  favor  one  particular  des- 
cription   of  pm  .  -I  that   they  rutlier   favored    one    sort   <•: 
per.     In  what  way  do  they  favor  it  ? 

They  favor  the  paper  of  what  I  should  call  legitimate  business, — 
pnper  connected  with  the  real  ordinary  trade  of  the  country, —  in  pref- 
erence to  the  bills  of  stock-johliers  or  large  speculators. 

i'iien  in  order  to  give  effect  to  that  distinction  they  must  reject  paper 

"  Undoubtedly ;  but  it  is  the  paper  of  ordinary  trade  that  they  never 

••  Have  they  any  rule  as  to  the  length  of  bills  ? 

"  I  cannot  State  what  their  rules  an-  in  this  re-peet.  Then  I  have  only 
lastly  to  state  that  there  is  no  limitation  as  to  their  issues  by  Inw,  nor 
is  thi  rulated  limitation  among  then  ,<-r  than  what  :. 

fmm  their  own  discretion  from  day  to  day  as  they  come  to  manage  their 

•JUn, 

••  In    th-  of   their  discretion   has  not  the   fact  been   that  the 

amount  of  bullion  kept  by  the  Hank  of  I  IK  -en  very  lai 

••  v  king,  I  believe  it    has.      This  gentleman  stated  to 

me  that  they  had  never  at  any  time  been  under  any  apprehension  as  to 
their  ability  to  pay  their  notes,  though  undoubtedly  we,  looking  at  the 
returns,  should  think  that  their  condition  was  rather  (]uestional>le. 

••  You  cannot  state  what  proportion  the  amount  of  bullion  in  their  hands 
has  generally  borne  to  the  numlx-r  of  notes  they  have,  issued? 

••  I  am  not  able  to  answer  that  myself;  but  a  return  is  regularly  made; 
it  is  very  easy  to  know  that. 

44  Do  you  know  in  point  of  fact  that  though  it  is  called  the  Hank  of 
France,  their  notes  were  not  current  throughout  the  whole  of  France  ? 

"Yes;  their  circulation  is  very  much  confined  to  Paris;  but  at  the 
same  time,  nine  tenths  of  the  business  of  F;  ;he  business  in  our 

own  country,  is  done  by  bills  upon  Paris,  and  Paris  really  is  the  heart  of 
the  whole  circulation.  I  have  only  further  to  state,  that  of  ;\.<  y 

have  had  branch  banks,  as  our  bank   has  had;  hut  : 
the   directory  did  not  think  favorably  of  the  working   of  those  branch 
banks;  he  thought  that  they  had   not  \x  en    profitable  to  tin  in,  and    that 
had  mther  disturbed  their  circulation. 

g  the  grr:i  of  the  time  to  which  your  ob*<  •  :iv 

applied  has  not  the.  law  confined  them  to  a  minimum  note  of  f)(;0  francs? 
•  is  only  lately  that  they  have  corn-  f   100  fau 

••  i  at  amount  of  securities  they  have  generally   held  ; 

what  we  should  call  Government  securii 

'•  That  is  stated  in  the  returns  which  are  periodically  pub! 

44  Supposing  that  the  natural  value  of  money  in  France  w;:s  (\  per  cent. 


The  Bank  of  France. 

and  that  the  ordinary  market  rate  of  interest  was  6  per  cent.,  does  your 
information  enable  you  to  state  to  the  committee  what  the  Bank  of 
France  would  do  in  order  to  answer  the  demands  which  must  be  made 
upon  it  if  it  maintained  its  own  rate  of  discount  at  between  4  and  5  per 
cent.  ? 

"  I  should  think  that  if  the  Bank  of  France  limited  their  interest  to  5 
per  cent,  they  would,  except  under  very  extraordinary  circumstances, 
guide  and  regulate  the  general  interest  of  the  place,  and  that  under  those 
circumstances  they  would  do  the  whole  of  the  real  commercial  paper  that 
is  presented.  What  is  more  singular,  the  banks  in  America  never  go  be- 
beyond  the  legal  interest.  None  of  the  banks  in  America  discount  at  a 
higher  interest  than  6  per.  cent.,  although  the  market  rate  of  interest  in 
that  country  is  very  often  10,  15,  and  18  per  cent. 

"  What  check  do  they  apply  ?  If  they  do  not  impose  a  restriction  by 
raising  the  rate  of  interest,  must  not  they  impose  some  other  restriction, 
either  in  the  date  of  the  bills  or  in  the  securities  ? 

"  No,  it  does  not  necessarily  follow ;  because  those  variations  in  the 
interest  do  not  materially  alter  the  real  business  connected  with  drafts  from 
Lyons  and  Havre  and  other  places,  and  the  paper  connected  with  the  real 
business  of  the  country.  If  Mr.  Rothschild  or  any  great  person  were  to 
send  them  in  a  mass  of  paper,  for  the  purpose  of  taking  advantage  of  the 
rate  of  interest,  they  would  not  do  it  for  him.  When  I  say  they  do  all 
the  paper  sent  in,  I  should  explain  that  they  distinctly  make  that  condi- 
tion, that  it  shall  be  paper  resulting  from  the  real  trade  of  the  country,  and 
that  seldom  materially  varies. 

"  What  is  the  nature  of  their  relation  with  the  Government  ?  Do  they 
receive  the  Government  deposits  and  securities  ? 

"  It  is  as  nearly  as  possible  the  same  as  that  of  our  Bank  of  England. 

"  Do  they  pay  the  dividends  on  the  French  rentes  ? 

"  No ;  they  have  nothing  to  do  with  the  dividends. 

"  They  are  not  liable  to  be  called  upon  by  the  Government  to  advance 
money  for  that  particular  purpose  ? 

"  Yes  ;  if  the  Government  want  assistance  they  stand  exactly  in  that 
respect  in  the  same  relation  that  our  bank  do  to  our  Government. 

"  Does  their  charter  require  them  to  make  advances  of  that  kind  when 
demanded,  or  is  it  optional  ? 

"  It  is  optional. 

"  They  may  act  just  as  they  do  with  the  general  trade  of  the  country  ? 

"  Yes.  They  stand  in  exactly  the  same  relation  to  the  Government  as 
the  Bank  of  England  does,  except  that  they  have  nothing  to  do  with  the 
payment  of  the  dividends  ;  but  they  hold  the  deposits  of  the  Government, 
and  in  fact  are  the  bankers  of  the  Government. 

"  Is  it  optional  with  them  to  pay  their  notes  in  gold  or  in  silver  ad 
libitum  1 

"  It  is  optional  to  pay  either  in  gold  or  in  silver,  but  of  course  they  pay 
only  in  silver  at  present ;  there  is  a  premium  at  present  upon  gold  of 
about  8  per  cent.,  which  has  not  been  known  for  a  long  time. 

"  What  has  been  the  lowest  denomination  of  note  that  they  issue  ? 

"  I  think  it  is  now  100  francs. 

K  K  *  437 


A  Treatise  on  Banking. 

44  What  is  it  in  ordinary  circumstances  ? 

**  Until  lately  thm-  were  no  notes  under  500  francs. 

^  ill  YOU  explain  a  little  more  fully  the  statement  you  made  as  to  the 
amount  of  discounts  afforded  by  the  Hunk  of  France  being  larger  than 
that  afforded  by  the  Rank  of  England,  because  the  transactions  of  the  two 
institutions  certainly  are  not  equal  ? 

••  If  we  look  back  to  the  returns  we  see  for  a  long  time  about  the  same 
amount  of  discounts  of  bills  by  the  Bonk  of  England,  —  £  2,800,000, 
£2,700.000,  £2,800,000,  .£2,900,000,  and  so  on.  If  you  take  the  av- 
erage of  the  last  ten  years,  I  think  you  will  find  the  discounted  bills  larger 
in  amount  in  Paris  than  here. 

"  Have  the  Government  any  power,  not  merely  of  supervising  the  acts 
of  the  bank,  but  of  compelling  them  to  adopt  any  steps  that  they  may 
think  fit? 

44  No ;  they  have  not.  The  bank  are  perfectly  independent,  and  that 
independence  has  been  respected  even  under  Napoleon's  government. 

\V;th  respect  to  those  persons  called  censors,  whajt  are  their  functions 
in  the  bank  ?  Are  they  chosen  by  the  bank  proprietors  ? 

44  They  are  chosen  from  among  the  manufacturers  of  Paris.  It  was  in- 
tended to  provide  that  there  should  be  three  at  least  of  the  class  of  manu- 
facturers of  Paris  in  the  direction,  and  three  of  the  receivers-general. 

44  Are  the  receivers-general  official  members  ? 

44 1  am  not  quite  sure  whether  the  receivers-general  were  named  by  the 
crown,  or  whether  they  were  elected  by  the  stockholders  from  the  general 

.!\. 

44  They  are  the  receivers-general  of  taxes  ? 

44  They  are  ;  there  is  a  receiver  in  each  department." 


Ntr*.  —On  the  night  of  UM  15th  March  (1848),  the  Provisional  Government  consented  to  the  twoe 
of  an  edict  erompthig  the  Bank  of  France  from  the  payment  of  iu  notes  in  ipecie,  —  rendering  the  pre- 
natal ton  of  theae  note*  In  payment  throughout  the  territory  of  France  a  legal  tender;  fixing  350  mil- 
lidp*  of  franc*  a*  the  maximum  of  the  outstanding  circulation  of  the  bank  at  one  time ;  authorizing  the 
M*oe  of  note*  for  100  franca  (£4)  each;  and  finally  directing  the  publication  every  week,  in 

r,  of  a  (nil  abetract  of  the  bank'*  balance  aheet. 
&j*trftmt  decree*  of  the  Z7th  April,  1848,  and  3d  May,  1848,  authorized  the  Incorporation  with  the 
Bank  of  France,  of  the  nine  "departmental  bank*"  (that  I*,  local  joint-ttock  bank*),  at  Bourdeauz, 
9mm,  Mian*,  Lyona,  ManeiUei,  Havre,  Lille,  Toulouae,  and  Orlean* ;  and  extended  the  privilege  of  the 
BaalrtploB*  to  UM  MMM  of  theee  bank*,  by  augmenting  the  mar/mum  limit  of  the  total  circulation  of 
:he  Bank  of  France,  and  all  it*  branches,  from  380  million*  to  402  million*  of  franc*,  of  from  £  14,000,000 
Marling  to  £  11,000,000  •terling. 

OB  UMflUi  AugoK,  1800,  the  .National  Aaaembly  of  France  gave  the  aanction  of  a  definite  law  to  a  pro- 
poaal  Mtahud  by  M.  Oonin  to  the  name  of  a  Committee,  In  favor  of  the  immediate  resumption  of  pay- 
ment* m  epecie  by  the  Bank  of  Franc*.  Few  men  in  France  have  dktinguUhed  ihemaelvea  more  than 
M.  Ooata  to  UM  aifinri  of  all  the  be*  Inauiuuooa  of  hta-country ;  and  it  will  be  univenally  fell  that 
the  liHiaAprttnn  of  a  meaavre  of  eo  much  delicacy  and  Importance  could  not  have  been  undertaken  by  any 
r  of  UM  AM*mfaly  having  a  bttler  title  than  M.  Oouln  to  connect  hi*  name  with  the  reeattblUh- 
L  of  UM  cndk  clrf«**lln*J  of  Franc*  upon  a  aound  bui*.  —  London  BanAeri>  Mugazine,  Sept.,  I860 


The  Bank  of  France. 

THE    CONDITION    OF  THE    BANK   OF   FRANCE  ON  THE 
TTH  OF  JUNE,   1849. 

DEBTOR.  Fes.      C 

Capital  of  the  Bank,  .        .        .        *•  ;    ,        .        .        .        •      67,900,000    0 

Ditto  of  the  ex-Departmental  Banks, 23,350-,000    0 

Reserve  of  the  Bank,          .  10,000,000    0 

Ditto  of  the  ex-Departmental  Banks, 2,980,750    0 

Reserve  of  the  Bank  in  Landed  Property, 4,000,000    0 

Bank  Notes  in  Circulation, 362,574,900    0 

Ditto  of  the  Branch  Banks 29,221,600    0 

Bank  Notes  to  Order, 920,941  75 

Treasury  Account  Current  Creditor, 23,591,14245 

Sundry  Accounts  Current, 109,762,12454 

Ditto  in  the  Branch  Banks, .        .      29,467,205    0 

Receipts  payable  at  Sight,  • 3,955,300    0 

Ditto  in  the  Branch  Banks, 1,212,782    0 

Draughts  of  the  Branch  Banks  payable  by  the  Bank,    ....    6,745,395  61 
Ditto  of  the  Bank  payable  by  the  Branch  Banks,      ....        4,697,068    0 

Dividends  payable, 203,369  25 

Liquidation  of  the  Algiers  Branch  Bank, 180,952  44 

Sundry  Discounts  anticipated, 3,574,784  09 

Ditto  of  the  Branch  Banks,        .        .  '     '.. 1,991,956    0 

Re-discounted  during  the  last  half-year,         .        .        .        .        .        .       246,109  85 

Ditto  in  the  Branch  Banks, 460,661    0 

Sundries,  , 412,355  86 

Total  Francs,         .        .        .      ' .        .        .        .    687,449,397  84 


CREDITOR.  Fes.      C. 

Cash  in  hand, 204,432,108  15 

Ditto  in  the  Branch  Banks,        .        . 129,579,652    0 

Commercial  Bills  Overdue, 172,390     6 

Commercial  Bills  Discounted,  but  not  yet  due,  of  which  14,556,742f. 

were  received  from  the  Branch  Banks, 47,680,034  90 

Ditto  in  the  Branch  Banks ,  .        .        .          78,395,013  56 

Advanced  on  a  deposit  of  Bullion, 10,770,400    0 

Ditto  by  the  Branch  Banks, 1,304,193    0 

Advanced  on  French  Public  Securities, <      25,064,517  40 

Ditto  by  the  Branch  Banks,    .         .        . 1, 438,405 '  0 

Advanced  by  the  State  on  Treasury  Bonds  of  the  Republic,      .        .      50,000,000    0 
Advanced  by  the  State  on  the  Loan  of  150,000,000f.,      .        .        .          50,000,000    0 

Loan  of  10,000,000f.,  to  the  city  of  Paris,  1,000,000    0 

Loan  of  3,000,000f.,  to  the  city  of  Marseilles, 1,000,000    0 

Loan  to  the  Department  of  the  Seine,        .        ...        .        .        3,000,000    0 

Government  Stock  reserved,  .        .       ..      .  r   '   A   .   .        .        .          10,000,000    0 

Ditto  disposable, 42,581,488  13 

Vested  in  Public  Securities  by  the  New  Branch  Banks,          .        .          12,770,541  30 

Hotel  and  Furniture  of  the  Bank, 4,000,000    0 

Landed  Property  of  the  Branch  Banks, 2,284,653    0 

Interest  in  the  National  Discount  Office,    ......          200,000    0 

Ditto  of  the  Branch  Banks,    . 230,000    0 

Commercial  Bills  protested,  and  not  yet  honored,       ....       5,997,353  39 

Ditto  in  the  Branch  Banks, 3,557,217    0 

Expenses  of  the  management  of  the  Bank, 571,020  86 

Ditto  of  the  Branch  Banks, 486,871     0 

Sundries, 924,538  95 

Total  Francs, 687,449,397  84 

439 


A   Treatise  on  Banking. 


No.  IV. 
A  Law  relating  to  Banking  in  New  York. 

The  following  "  Act,  to  amend  an  Act  entitled  '  An  Act  to  abolish  tho 
Office  of  Bank  Commissioner,  nml  for  other  Purposes,  passed  April 
iNh,  1K43,'"  passed  the  Legislature  of  New  York,  December  -Itli, 
1847:  — 

The  people  of  the  State  of  New  York,  represented  in  Senate  and  As- 
sembly, do  enact  as  follows :  — 

§  1.  The  third  section  of  tho  Act  entitled  "  An  Act  to  Abolish  the 
Office  of  Bank  Commissioner,  and  for  other  Purposes,"  passed  April  18th, 
1843,  is  hereby  amended,  so  as  to  read  as  follows :  — 

It  shall  be  the  duty  of  the  comptroller,  secretary  of  state,  and  treasurer, 
on  or  before  the  first  Tuesday  of  January,  April,  July,  and  October  in 
each  year,  to  fix  upon  and  determine  some  Saturday  in  the  quarter  of 
the  year  then  ended,  in  respect  to  which  every  incorporated  bank,  bunk- 
ing association,  and  individual  banker  in  the  State,  shall  make  a  report 
of  the  character  hereinafter  specified.  Immediately  after  each  determi- 
nation of  such  Saturday,  the  officers  hereinbefore  named  shall  cause  no- 
tice thereof  to  be  published  daily,  for  six  successive  days,  in  such  news- 
paper published  in  the  city  of  Albany  as  shall  for  the  time  being  have 
the  publication  of  legal  notices,  under  the  Act  entitled  "  An  Act  to  Pro- 
vide for  the  Public  Printing,"  passed  March  5th,  1846,  or  shall  serve  a 
copy  of  such  notice  upon  each  incorporated  bank,  banking  association,  or 
individual  banker  in  the  State,  by  delivering  the  same  to  some  officer  or 
clerk  thereof,  at  their  respective  places  of  business,  or  by  depositing  the 
same  in  the  post-office,  directed  to  each  of  such  banks,  banking  associa- 
tions, and  individual  bankers,  or  some  officer  thereof,  at  their  places  of 
business  respectively. 

It  shall  be  the  duty  of  every  incorporated  bank,  banking  association, 
or  individual  banker  in  the  State,  on  or  before  the  first  day  of  February, 
May,  August,  and  November,  of  each  year,  to  make  and  transmit  to  the 
comptroller  a  quarterly  report,  which  report  shall  be  made  on  the  oath  of 
the  president  and  cashier,  and  shall  contain  a  true  statement  of  the  con- 
dition of  the  bank,  banking  association,  or  individual  banker  making  such 
report,  before  the  transaction  of  any  business,  on  the  morning  of  the  day 
specified  in  the  notice  of  the  comptroller,  secretary  of  state,  and  trea- 
surer, next  preceding  the  date  of  such  report,  in  respect  to  the  following 
items  and  particulars  ;  to  wit :  — 

Loans  and  discounts,  overdrafts,  due  from  banks,  due  from  directors  of 
the  banks  or  banking  associations  making  the  report  ;  due  from  brokers, 
real  estate,  specie,  cash  items,  stocks  and  promissory  notes,  bills  of  sol- 
vent banks,  bills  of  suspended  banks,  loss  and  suspense  account,  capital, 
circulation,  (distinguishing  that  received  from  the  comptroller  from  the 
old  outstanding  bills,)  profits,  amount  due  to  banks,  amount  due  to  indi- 
viduals and  corporations  other  than  banks,  amount  due  to  the  treasurer  of 
the  State,  amount  due  to  the  commissioners  of  canal  fund,  amount  due 
to  depositors  on  demand,  amount  due,  not  included  under  either  of  the 

440 


Banking  in  New  York. 

above  heads.  And  it  shall  be  the  duty  of  the  comptroller  to  publish  such 
reports  together  in  the  newspapers  printed  in  the  city  of  Albany,  in  this 
section  before  named,  accompanied  with  a  summary  of  the  items  of  cap- 
ital, circulation  and  deposits,  specie  and  cash  items,  public  securities  and 
private  securities  ;  and  the  separate  report  of  each  bank,  banking  asso- 
ciation, and  individual  banker,  shall  be  published  in  a  newspaper  pub- 
lished in  the  county ;  if  a  newspaper  is  published  in  the  city  or  town  in 
which  any  bank  is  situated,  such  publication  shall  be  had  in  such  papers 
in  which  such  bank,  or  banking  association,  or  banking-house  of  such  in- 
dividual banker  shall  be  situated,  at  the  expense  of  such  bank  or  bank- 
ing association,  or  individual  banker. 

§  2.  Section  four  of  the  Act  in  the  first  section  of  this  Act  referred 
to,  is  hereby  amended  so  as  to  read  as  follows ;  to  wit :  — 

The  comptroller  shall  publish  the  reports  and  summary  required  by 
the  third  section  of  this  Act,  together  in  one  paper,  on  or  before  the  25th 
day  of  August,  November,  February,  and  May,  in  each  year ;  and  the 
expense  of  such  publication  shall  be  defrayed  by  a  percentage  assessed 
upon  the  capital  stock  of  all  the  banks,  and  banking  associations,  and  in- 
dividual bankers  doing  business  under  the  "  Act  to  Authorize  the  Busi- 
ness of  Banking,"  passed  April  18th,  1838,  or  of  any  Act*  amending  the 
same  in  the  said  State  ;  and  if  any  such  bank,  banking  association,  or  indi- 
vidual banker  shall  fail  to  furnish  to  the  comptroller  its  quarterly  report 
in  time  for  such  publication,  it  shall  forfeit  and  pay  to  the  comptroller  the 
sum  of  one  hundred  dollars,  to  be  applied  by  him  to  the  expense  of  publish- 
ing the  quarterly  reports.  And  if  any  bank,  banking  association,  or  in- 
dividual banker,  shall  neglect  or  refuse  to  make  the  quarterly  report  re- 
quired by  the  third  section  of  this  Act,  for  two  successive  quarters,  it  shall 
forfeit  its  charter  (if  an  incorporated  bank),  and  its  privileges  as  a  bank- 
ing association  or  individual  banker,  if  organized  or  doing  business  under 
the  Act  of  April  18th,  1838,  in  this  section  before  referred  to ;  and  every 
such  bank,  banking  association,  and  individual  banker  may  be  proceeded 
against,  and  its  affairs  closed,  in  any  manner  now  required  by  law  in  case 
of  an  insolvent  bank  or  banking  association. 

§  3.  Whenever,  in  the  opinion  of  the  comptroller,  there  shall  be  good 
cause  to  report  that  any  bank,  banking  association,  or  individual  banker, 
has  made  an  incorrect  or  imperfect  quarterly  return,  or  is  in  an  unsound 
or  unsafe  condition  to  do  banking  business,  it  shall  be  his  duty  to  have 
the  books,  papers,  and  affairs  of  such  banks,  banking  associations,  or  in- 
dividual banker,  examined  by  some  competent  person,  to  be  designated 
by  him,  who  shall  examine  fully  into  his  books,  papers,  and  affairs,  forth- 
with, and  report  to  the  comptroller,  on  oath,  the  result  of  such  examina- 
tion ;  a  copy  of  which  report  shall  be  forthwith  published,  in  the  manner 
prescribed  in  the  first  and  second  sections  of  this  Act,  in  respect  to  the 
publication  of  quarterly  returns.  The  reasonable  costs  and  expenses  of 
every  examination  shall  be  defrayed  in  the  manner  prescribed  in  the 
second  section  of  this  Act  for  paying  the  expenses  of  publishing  quarterly 
returns. 

$  4.  All  individual  bankers,  and  all  banking  associations,  which  are 
now  or  shall  be  hereafter  engaged  in  the  business  of  banking,  under  the 

441 


A  Trtatitt  on  Banking. 


provision*  of  the  Act  entitled  "  An  Act  to  Authorize  the  Business  of 
Banking,"  shall  be  subject  to  taxation  on  the  full  amount  of  capital  ac- 
tually paid  in,  or  secured  to  be  paid  in,  as  such  capital,  by  them  severally, 
at  the  actual  market  value  of  auch  securities,  to  be  estimated  by  tin- 
comptroller,  without  any  reduction  for  the  debts  of  such  individual  banker, 
or  banking  association  ;  but  in  no  cose  shall  the  capital  of  any  such  bank- 
ing association,  or  individual  banker,  be  estimated  at  a  less  sum  than  the 
amount  of  circulating  notes  deli\<-red  to  such  banking  association,  or  indi- 
vidual bunker,  and  not  returned  to  the  comptroller ;  and,  in  cose  the  cap- 
ital of  such  banking  association  has  been  reduced  by  the  surrender  of 
anv  securities  to  the  stockholders  thereof,  and  tho  certificates  of  stock 
held  on  account  of  such  securities  being  surrendered  to  such  banking  as- 
sociation and  cancelled,  such  banking  association  shall  not  be  subject  to 
taxation  upon  such  part  of  its  capital. 

$  5.  Nothing  in  this  Act  contained  shall  apply  to  any  bank  or  banking 
association  which  has  reduced  its  capital  stock  in  violation  of  the  twenty- 
eight  section  of  an  Act  entitled  "  An  Act  to  Authorize  the  Business  of 
Banking,"  passed  April  18th,  1838. 

The  following  is  a  summary  of  all  the  Banks  in  the  United  States  :  *  — 


BANK  CAPITAL  OF  THE  SEVERAL  STATES. 


\.-   • 


New  York, 
New  Jenej, 
PenaerlTania, . 
Delaware.    .       . 
Maryland.        .        . 
I»i«uict  of  Columbia, 
Virginia, 

North  CaraUna,   . 
South  CuuUna;       . 

-- 


M         '-•       . 


I    • 


Touk, 


7  './'<<  '"•'•".•! 

No.  of 
Bankt. 

Bank 
Capital. 

Hunk 
Circulation. 

Bank  Coin. 

.-.-•.'••1 

u 

:i:.!~  mi 

2,600,000 

475,000 

918,000 

29 

• 

1,78 

314,300 

27 

'i  >.">o,000 

187,000 

966,000 

130 

17,00 

3,00 

147,800 

63 

11,189,000 

•• 

909,000 

878,000 

49 

In  i<~  (  mi 

6.410,000 

638,000 

Um,800 

1  •  "> 

;,|  niM.ii 

20.HII'.,, 

l^niiii.i 

180,300 

26 

8,754  '."> 

3,(HO,000 

888,000 

'J.  ^.V  ii  i  «  1 

63 

1^  >;::,  mi 

11,980,000 

7,au 

'.•i  Mil 

9 

1,440,000 

800,000 

200,000 

675.KJO 

84 

'.l.nr-i  nil 

t3,3»,000 

12,812,000 

.M'MI 

4 

1,188,800 

1  300,000 

f  940,000 

1,498.800 

35 

9,718.000 

• 

2,627,000 

£0,000 

19 

1,660,000 

3,600,000 

L.Viinn 

639,100 

14 

1  7,700,000 

•f  -^  '4  1  1  1  1  1  1 

960,000 

17 

r>.:c«i  'in 

1  4,600,000 

1  1,500,000 

2  190  000 

67 

?  |>i  mi 

0,000 

8,7; 

•.--.in 

26 

10,180,000 

-.,.!,.., 

8,800,000 

1,850,000 

13 

3..-" 

807,600 

6 

789,000 

1^1  ll«l 

1,060,000 

81 

-    \l\~,  '•!) 

t  6  600000 

1  1,5(0,000 

800,000 

I 

8,000,000 

f  1,500,000 

696,000 

6 

13,600,000 

6,500,000 

880,008 

1 

(00,000 

t  nn.OOO 

1  80,000 

r.-i  .vn 

6 

1,904,0(0 

2,400,000 

1,600  1**) 

175,000 

1 

900,000 

t  /••*  000 

1  60,000 

305,000 

1 

896,000 

t»  10,000 

II  '0,000  • 

ir.-.nu 

1 

800,000 

1  300,000 

1  100,000 

86,000 

,  , 

.    .    . 

•      .      . 

•     .      . 

860,080 

.    .    . 

.    .    . 

.    .    . 

866    •  899,061,200     8143,630,000      •66,460,000 


*  In  UM  of  Uw  ubte  poblUhed  In  the  En«-li«h  edition  we  Iwert  a  •Utemmt  brought  down  to  the  year 
*8II,  from  nc«nl  docmMOU,  for  which  we  an  indebted  to  the  Banker*1  Magaiint,  puUuhod  at  Bo* 
Um.-Am.PmA. 

t  Kulmeied  to  part. 

442 


ALPHABETICAL  INDEX 


TO  THE  SUBJECTS  CONTAINED  IN 


A  PRACTICAL  TREATISE  ON  BANKING,  BY  J.  W.  GILBART. 


The  reader  is  reminded  that  he  is  advised  to  answer  all  references  in  this  form  without  looking  into 
the  book,  and  aloud.  See  the  Section  on  Index  Reading.  A  book  is  described  by  stating  its  uses,  how 
it  is  ruled,  how  the  entries  are  made,  and  against  what  books  it  will  mark.  See  page  155. 


ABOLITION  of  notes  under  £5.  In  Scotland,  330 ; 
in  Ireland,  375. 

Abundance  of  money.  Usually  precedes  a  season 
of  pressure,  62,  57 ;  and  follows  it,  60. 

Acceptance-book.    Describe  it,  163. 

of  a  bill  of  exchange  should  not  be 

written  on  the  back  of  the  bill,  30. 

Accepter  or  Acceptor  of  a  bill  of  exchange. 
Which  should  we  write?  10. 

Accommodation  bills.  In  what  cases  a  party  can 
enforce  payment,  36;  how  are  they  known? 
21,40. 

Account  current.  What  is  the  difference  between 
an  account  current  and  a  current  account  ?  164. 

,  mode  of  opening  one,  154. 

Accountant.  His  books  should  be  a  check  upon 
the  cash  department,  131 ;  his  department,  137. 

Acts  of  Parliament  quoted.  Bank  Charter  Act  of 
1832,  233 ;  Bank  Charter  Act  of  1844,  233,  284, 
288 ;  Act  of  1844  to  regulate  Joint-Stock  Banks 
in  England,  308 ;  Joint-stock  Companies  Wind- 
ing-up  Act,  1848,311 ;  Hibernian  Bank  Act,  369; 
Act  of  1845  for  Regulating  Banks  in  Ireland, 
372. 

Addresses.  Desirable  to  indorsements  of  bills  of 
exchange,  30. 

Administration  of  the  office,  126. 

Administrative  functions  in  a  bank.  Their  distri- 
bution, 107;  by  whom  ought  they  to  be  exer- 
cised? ib. 

Advances.  Different  ways  in  which  advances  are 
made  by  bankers,  2. 

-  on  its  own  shares,  no  banking  company 


allowed  to  do  so  that  is  formed  under  the  new 

Act,  309. 
Advice  book.    Describe  it,  163. 

journal.    Describe  it,  163. 

Age.    Expectations  of  life  at  different  ages,  27;  of 

directors,  104;  different  tables  of,  231;  at  which 


clerks  are  admitted  into  a  bank,  129. 
Agreements  with  the  Bank  of  England. 


Provi 


sions  in  the  Act  of  1344  respecting  banks  that 
had  formed  them,  288 ;  a  list  of  those  banks,  289. 

Agricultural  and  Commercial  Bank  of  Ireland, 
372;  their  stoppage,  55;  their  mode  of  book- 
keeping, 117. 

Allotment  of  shares  in  a  new  bank,  203. 

Almsgiving.  Kindness  to  the  poor  need  not  al- 
ways take  this  form,  410. 

Alteration.  Material,  in  a  bill  of  exchange,  viti- 
ates the  bill.  35 ;  what  is  a  material  alteration  < 
ib. 

Alterations.    In  deeds  of  settlement,  how  made, 


301. 


America.  Money  table  of  the  United  States,  197 ; 
the  par  of  exchange  between,  and  London,  196; 
laws  respecting  the  circulation  of  gold  coins,  197 ; 
value  of  sovereigns  in,  198;  the  expenses  of 
sending  gold  to,  ib. ;  trade  with  India,  342 ;  a 
summary  of  all  the  banks  in,  442;  pressure  in, 
in  1836,  55. 

American  dollars.  How  turned  into  pounds  ster- 
ling, 191. 

securities.    Large  sums  invested  in,  in 


443 


1838,  56. 

Amsterdam.  Mode  of  ascertaining  the  relative 
value  of  gold  at,  221. 

Amusements  of  a  banker,  14. 

Analogy.    Arguments  from,  the  nature  of,  391. 

Anderson,  J.  A.,  general  manager  of  the  Union 
Bank  of  Scotland.  His  opinion  as  to  bankers 
holding  their  reserves  in  bills  of  exchange,  46. 

Angel.  The  name  of  an  old  English  coin ;  the 
origin  of  the  application,  223. 

Annual  dinner  to  clerks.    A  good  practice,  401. 

Annuities  grantel  by  the  Provident  Clerks'  Asso- 
ciation, 229 ;  on  what  terms  they  can  be  pur- 
chased at  the  savings  banks,  230 ;  Long  Annui- 
ties, how  a  purchase  of  is  entered  in  the  banker's 
books,  191. 

Application  for  shares  in  a  new  bank.  Form  of 
one,  203. 

Apprenticeship.  None  required  to  carry  on  busi- 
ness as  a  banker,  1. 

Approaching  failure.  Symplons  of,  which  a  bank- 
er should  observe,  27. 

April.  The  highest  calculation  of  the  country 
banks  is  in  this  month,  293, 294. 

Arbitration  of  exchanges.  What  is  it?  194;  ex- 
amples, 195,  201. 

Arrangement  of  counters  and  desks  in  a  bank,  128. 

Art,  Scriptural,  of  getting  rich,  418. 

Artificial  memory.    Applied  to  figures,  199. 

Ashburton,  Lord.  His  evidence  respecting  the 
Bank  of  France,  433. 

Assets  and  liabilities  of  a  bank  must,  under  the 
new  Act,  be  published  every  month,  309. 

Assimilation  of  the  currency  in  England  and  Ire- 
land, 337. 

Assistance  in  times  of  pressure.  Great  prudence 
necessary  in  granting,  59. 

Attendance,  punctual,  of  bank  clerks  in  the  morn- 
ing, 140. 

Auditors.  Under  the  new  Act,  two  or  more  not 
being  directors,  must  be  chosen  at  a  general 
meeting  of  shareholders,  309. 

August.  The  lowest  circulation  of  the  country 
banks  is  in  this  month,  293,  294. 


A  Treaiite  on  Banking. 


A,-.-..', 


Or  all  UM  bank*  In  the  United 


e*<  h  bank  In  Ireland,  WX 


Scotch,  write  "accepter,"  UMtead  of 
-iceiMir.'*  oTtblB  of  exchange.  10;  ••  todor- 
•aUon''  nors  frequently  than  •' indorsement," 
II ;  UMJT  iMk  k*(Wy  of  their  *y«te«  of  ax- 

•vSSa 


.•     .  •  .       r     t 

k.      •        . 


UM   English 
\h*4rbUle,a»;  and  for 

on  current  aeen«iite,  HS; 
itiiin*ion.  iA. ;  aad  for  kftv 
capital,  390. 


fUss  ioa  Charte*.    HI*  otoamtloM  on  UN  d« 

tortty  oT  dark*.  ITS. 
Bseo*,  Lori    HI*  obMrrMtoM,  appli«d  to  took- 

.•  MI 

The  cmiiM  of  UM  uilure  of 
,1111 

i  of,  an  MtaUoB  of  ttw  clrcum- 
ounwi  of  UM  party, ST. 

,  ID.    What  I*  it,  and  how  performed,  153. 

.dally.     How  made,   169;   tMtdi  to  the 

lnyrev**nnjt  of  UM  clerk*,  146;   weekly,  170; 
Btyovty.  in. 

— —  okoM.  Exhibited  at  the  grntnl  meeting 
oT  ehareholder*  of  joinl-atock  bank*,  110;  objec- 
tion toll,  io. 

•" f  '     '      f    IlllaMI 


reepsctiac.  XM. 

sheet*.  Form  of  one,  166;  form  of  an- 
other, 1 7X 

Bank.  The  word  derived  frwn  "banco,"  the  Iu 
Itaa  word  for  '•  bench,"  I ;  le  It  singular  or  plu- 
ral. 8;  *uw  the  ease*  In  which  It  I*  wed  In  the 
singular,  and  In  which  It  is  need  In  the  plural.  6. 

,  toe  building.  Should  be  In  a  reepecuble 

pan  oTthe  town,  196;  should  to  a  handsome 
.-  ,'. 

Bv<k  Charter  of  1844.  IX  r  Wed  the  bank  Into  two 
department*,  68;  the  ieeoe  department  to  leeue 
.£1-1000,000  upon  eeruriiiee.  6* ;  compelled  the 
hart  to  MMM  not**  again*  gold,  at  £3  17r  M. 
per  ounce,  iA. ;  the  bank  roar  extend  her  issue 
under  certain  circumetancee.  iA. ;  remark*  on  the 
Act,  68;  h*  empenetou,  63;  wai  fairly  tried. 
.  M  eaid  to  have  eecured  the  eonvertibili- 
|M  supposed  to  have 
•JMM  ..!  riheVdHI  <• 
la  low  rauof  inter**.  63; 
kd  to  rpecalaltooe.  ib. ;  iu  effect*  on  the  bank 
maaafement,  69 ;  doee  not  admit  of  thoee  expan- 
sion* of  UM  cwraocy  that  are  required  by  the 
dooMetic  traneactione  of  UM  country .  ib. ;  Iu  ef- 
MCU  la  reepect  to  the  railway  depoeiu,  70;  In  re- 

rio  eiportatkxM  oTgold  for  epecinc  purpoee*. 
In  rajard  to  a  demand  for  fold  by  Scotland 
or  Inland,  or  UM  country  bank*  of  EnrUnd,  70 ; 
Iu  eflecu  in  producinf  and  agfraTalinf  preeenre, 
71 ;  tend*  to  create  panic,  ae  well  at  preeeure, 
79;  depriTei  UM  Bank  of  Enfland  of  the  power 
of  fiMUlnc  adequate  a«e»Hinci  during  a  pree- 
am,  73;  what  we  nave  yet  to  Mara  meeting 
It.  75;  princlpiee  on  which  banker,  eboukl  con- 
doet  their  eeuhiuhroenu  dnrinf  iu  continuance, 
78;  (ivM  advantage  to  capital Uu,  81  ;  effect  on 
the  branchee  of  UM  Bank  of  Enfland,  MO;  GOT- 
•mala*  Mtur  iejeMHdlnf  it.  247 ;  comparatire 
*iewof  fa  «*cu  faSoodand,  Ireland,  and  Sag- 
laaJ  ITU 

<••  ••  v 


le  etm  lo  nave  eecured  the  convert 
ty  of  the  note,  64  ;  advantefee  mippoeed  to 

of  money.  47;  caunda  low  rate  of  Irrtereet 


the  charten  oT,  239;  "term  of  that  rranted  In 
1444,  03:  tb.  prtocJpl*.  of  Iu  administration. 
S37;  Iu  branch**,  «»7  prinelptae  of  their  ad- 
•Jlnbt ratlae^  «40;  UM  law*  of  the  currency  with 
HiinuLi  to  UM  Bank  of  Eociand.  ib. ;  objee- 
UOM  to  one  bank  of  to***,  »d ;  letter  from  UM 

444 


OovemnMBt  to  Dlraeton,  *u*p*ndlnn  the  Act  of 
1844.  M7 ;  UM  periodical  return*  wllib*  obeerved 
minutely  In  eeaeon*  of  preMure.  60 ;  bank* r* 
cannatdeptnd  an  then  for  awictence  In  amon* 
of  preeaura,  7V. 

•  •      -  ,  admlnUtratlon  of  the  office, 

eakrtoe  to  clerk*.  l»l;  bolUUy*.  143;  curety 
bonda,  136;  medkal  attendanc*,  141. 

— — —  of  Franca.    Sm  Franc*. 

of  Ireland.    At  Ireland. 

.    of  Scotland.    Sm  Scotland. 

Banker.  What  to  one)  I  4M ;  doe*  not  le«ally 
require  an  apprentlceehlp,  I ;  hie  qualification*, 
18 ;  ihouUI  to  a  man  of  wiedom  rather  than  of 
canlua,  io.;  chiiuld  poeeeee  declelon,  18;  and 
firmneee,  ib. ;  not  of  a  hasty  temper,  lA. ;  not 
•wared  by  a  perennal  or  conitllutlonal  prepoe- 
•eation,  i'b.  ;  ilviilil  know  himself,  ib.  ;  of  pru- 
dent habit*,  M  ;  ibould  know  how  to  select  suit- 
able Instrument*.  16;  chotild  know  how  lo  work 
thruufh  other*,  io. ;  should  economize  lui  OKI, 
time,  ib.;  observe  a  principle  of  onlrr.  VI  . 
shorten  hi*  interview*,  io.  ;  should  have  a  talent 
for  obtelninc  and  recording  Information,  16; 
should  get  a  knowledge  of  the  mean*  and  tram- 
action*  of  his  customer*,  18;  should  always 
have  general  principles,  ib. ;  should  cultivate 
chiefly  some  main  branches  of  buslna**,  19; 
should  exercise  due  caution  In  taking  new  ac- 
counU,  t'A. ;  a  email  tanker  should  not  take 
large  account*,  19;  should  study  the  rule*  of  dis- 
counting bills,  DO;  should  guard  a/alnet  forge- 
rlee,  81 ;  should  avoid  dead  loan*,  23 ;  even  to 
rich  men,  iA. ;  advance*  on  deed*  should  only  be 
made  on  special  occasion*,  86;  bill*  of  lading;  *nd 
duck-warranu  ilmuld  to  avoided,  86;  and  so 
should  policies  of  insurance,  iA. ;  he  should  ob- 
serve  the  signs  of  approaching  failure  In  his  cus- 
tomers and  others,  27;  should  understand  the 
"  nursing  "  of  an  account,  '27. 

Bankers.  London.  In  the  year  1746,  were  usually 
member*  of  the  company  of  goldsmiths,  1 ;  do 
not  usually  grant  interest  on  depoeiu,  3.  Stt 
Ixmdon. 

Banker's  Clerk.  The.  Quotation  from  an  excellent 
book  ao  called,  140. 

Bankers'  Magazine.  Quotation  from,  18 ;  reasons 
for  all  bankers  promoting  iu  circulation  among 
their  officer*,  148;  is  a  record  of  banking  and 
currency,  329. 

Banking  Department  of  the  Bank  of  England. 
Separated  from  the  Icsue  department  by  the  Act 
of  1844,  63;  itssute  on  September  7,  1844,  84 ; 
viewed  as  an  independent  bank,  it  has  too  larre  a 
capital,  iA ;  and  too  large  a  rest,  iA. ;  claaslflca- 
lion  of  Iu  deposlu,  86 ;  how  far  permanent,  87 ; 
now  Iu  ilepnsiu  are  affected  by  the  foreign  ex- 
changes, t'A. ;  iu  investment*.  (A  ;  whether  or 
not  convertible,  iA. :  Government  stock  and  an- 
nuities, 86 ;  short  loan*,  iA  ;  advance*  on  defi- 
ciency bills,  89 ;  the  reserve.  iA. ;  how  affected 
by  the  importation*  of  gold,  90.  The  operation* 
of  the  banking  department  from  September. 
1944,  to  September,  1645,90;  reduced  the  rate  of 
discount  to  2f  per  cent.,  90;  adopted  the  princi- 
ple of  a  minimum  rate  of  discount,  iA. ;  c«ni|*- 
lilion  for  discounu,  t'A. :  inquiry  how  far  the 
bank  rate  of  discount  govern*  the  market  rate, 
iA. ;  the  true  principles  of  banking.  91 ;  tenden- 
cy of  a  low  rate  of  interest  to  produce  specula- 
tions, t'A. ;  the  public  duties  of  the  banking  de- 
partment, iA  :  administration  of,  from  Septem- 
ber, 1845,  to  September.  1846,  98:  various  rate* 
of  Interest,  iA. ;  principle*  on  which  the  rate  of 
interest  I*  regulated  in. ;  railway  deposit*,  how 
managed,  92;  administration  of,  from  S-|  • 
1846,  to  September,  1847,  iA. ;  various  rale*  of 
Interest.  iA. ;  unfavorable  course  of  exchsnge,  93; 
deficient  harvaat,  iA  ;  deficiency  bill*,  iA. ;  pros- 


Alphabetical  Index. 


sure  in  April,  93;  restricted  their  discounts,  t'6. ; 
refused  to  grant  loans  on  exchequer  bills,  t'6. ; 
borrowed  money  on  consols,  t'6. ;  censures  on 
the  bank  directors,  16. ;  practice  of  London 
bankers,  91 ;  question  as  to  the  publication  of 
the  bank's  reserve,  t'6. ;  administration  of, 
from  September  1847,  to  September  1848,  t'6.; 
rates  of  interest  charged,  t'6. ;  failures  of  houses 
in  the  corn  trade,  and  of  other  large  commercial 
houses,  95 ;  advances  made  by  the  bank,  t'6. ; 
lent  stock,  exchequer  bills,  and  India  bonds,  96 ; 
deputation  from  the  London  bankers  waited  on 
the  Government,  t'6. ;  letter  from  the  Govern- 
ment suspending  the  Act  of  1844, 96;  state  of  the 
bank's  reserve,  t'6. ;  decline  of  the  pressure,  97 ; 
distinctive  characteristics  of  the  first  four  years 
of  the  operations  of  the  banking  department,  98 ; 
importance  of  this  review,  t'6. 

Bankrupt.  The  word  derived  from  two  Italian 
words,  which  signify  a  broken  bench,  2 ;  joint- 
stock  banks  are  subject  to  the  laws  of  bankrupt- 
cy, 310;  those  of  Scotland  and  Ireland  excepted, 
by  9&  10  Vic.  cap.  85,381. 

Bankrupts.  If  all  the  parties  to  a  bill  are  bank- 
rupts, the  holder  may  prove  for  the  full  amount 
under  each  commission,  34. 

,  fraudulent.    In  no  case  should  bankers 

retake  their  accounts,  396. 

Banks.  How  divided,  1 ;  the  business  of,  t'6. ;  the 
disposable  means  of,  2 ;  the  expenses  of,  t'6. 

Belfast,  banks  in,  371 ;  table  of  their  capital,  <fcc., 
t'6. 

Banking  Company.     Its  origin,  371 ;  its 

branches,  t'6. 

Bell,  Gavin  Mason,  author  of  the  Philosophy  of 
Joint-stock  Banking.  Quotations  from,  on  the 
qualifications  of  directors,  104;  ditto  of  mana- 
gers, 107. 

Bell,  Robert,  manager  of  the  City  of  Glasgow  Bank 
in  Edinburgh.  His  first  letter  to  the  author,  320; 
his  second  letter,  325. 

Benevolence,  the  duties  of.  Inculcated  by  Moses, 
408 ;  by  Job,  403 ;  by  Solomon,  t6. ;  in  the  New 
Testament,  t'6. ;  the  rule  by  which  it  should  be 
exercised,  t'6. ;  should  not  be  indiscriminate,  409. 

Bequest.  Form  of  one  to  the  Provident  Clerk's 
Association,  229. 

Bible,  a  code  of  laws,  not  a  book  of  adjudged  cases, 
395 ;  its  political  economy,  418.  See  Scripture. 

Bill-brokers.     Bankers'  loans  to,  48 ;  failure  of,  t'6. 
•         people  who  discount  with,  when  money 
is  abundant  and  cheap,  return  to  their  banker  in 
seasons  of  pressure,  59. 

banks  should  not  depend  on  them  for 

assistance  in  seasons  of  pressure,  79. 

Bill  committee,  302. 

journal.    Describe  it,  159. 

ledger.    Describe  it,  159. 

•  register.    Describe  it,  159. 

Bills  offered  for  discount.  Various  classes  of,  20 ; 
topics  of  inquiry  about  them,  21. 

presented  for  payment  by  bankers,  5. 

if  a  banker  misapplies  bills  lodged  by  his  cus- 
tomer, who  loses  7  36. 

of  exchange.    What  is  one  7  29 ;   the  form, 

16. ;  who  are  the  parties  to  one  7  30 ;  how  are 
they  divided  7  20 ;  what  it  a  set  of  bills  7  31 ; 
what  stamps  are  required  7  33 ;  when  must  a  bill 
be  presented  7  32;  when  must  a  notice  of  dishon- 
or be  given  7  (See  Notice)  ;  formed  a  large  part  of 
the  circulation  of  Lancashire,  40;  forms  of  for- 
eign bills,  39 ;  some  bankers  hold  their  reserves 
in,  46. 

of  lading.    Not  proper  security  on  which  a 

banker  should  make  advances,  26. 
Bishop,  the  admonitions  of,  have  less  effect  upon 

some  people  than  the  frown  of  a  banker,  7. 
Blair,  Alexander,  treasurer  of  the  Bank  of  Scotland. 


letter  addressed  to,  by  Mr.  Einnear,  on  exchange 
companies,  349. 

Boards  of  directors.  Govern  the  joint-stock  banks, 
108,  301 ;  should  be  composed  of  members  of  va- 
rious ages,  104;  should  treat  the  manager  with 
kindness  and  confidence,  105 ;  should  guard 
against  the  undue  ascendency  of  individual  mem- 
bers, 122,  382 ;  should  not  be  guided  too  much  by 
the  applauses  or  admonitions  of  the  shareholders, 
122 ;  should  be  well  paid  for  their  services,  12£; 
duties  of,  towards  the  servants  of  the  bank,  401. 
See  Directors. 

Boating,  a  serviceable  recreation  for  bank  clerks, 
141. 

Bonds  of  security.  Form  of,  given  by  rrianagers, 
205 ;  and  by  clerks,  206 ;  cash  credit  bonds,  210; 
of  the  Guarantee  Society,  224. 

Book-keeping.  The  importance  of,  117;  banks 
should  estimate  their  losses,  118;  should  keep  an 
account  of  the  bills  re-discounted,  t'6. ;  each  branch 
should  have  a  good  system  of,  118. 

banking.    A  system  of,  150 ;  the 


horizontal,  176 ;  comparison  between  commercial 
and  banking,  180;  books  connected  with  the 
clearing,  253. 

Branches.  Of  the  Bank  of  England,  239 ;  of  the 
Banks  of  Scotland,  315 ;  of  the  banks  in  Ireland, 
358,  366,  371 ;  of  the  country,  private,  and  joint- 
stock  banks,  291,  321 ;  of  the  joint-stock  banks  in 
London,  279. 

of  the  Bank  of  England  at  Manchester  and 


Liverpool  diminished  the  bill  circulation  of  Lan- 
cashire, 40 ;  the  circulation  of,  in  notes  and 
drafts,  239. 

of  joint-stock  banks.    Their  advantages, 


108  ;  give  facilities  for  the  transmission  of  money, 
t'6. ;  are  opened  in  places  that  could  not  support 
an  independent  bank,  t'6. ;  promote  the  distribu- 
tion of  capital,  109 ;  secure  a  better  system  of 
management,  t'6. ;  require  a  proportionate  paid- 
up  capital,  t'6. ;  require  competent  managers, 
and  a  good  system  of  discipline,  110 ;  comparison 
between  branch  banks  and  independent  banks, 
t'6. ;  rules  for  governing,  118 ;  of  the  London  and 
Westminster  Bank,  266. 

Branch  department,  what  books  are  kept  there,  164. 

Brokers'  bills.  First  class  bills  so  called,  are  dis- 
counted by  bankers,  45-48. 

Bullion,  Thomas.  A  signature  to  a  series  of  letters 
to  a  branch  manager  in  the  Bankers'  Magazine, 
18. 

Business  habits.    What  are  they  7  147. 

CALCULATING  boys.  Principles  of  their  operations, 
199. 

Calculations,  hanking,  with  reference  to.  The  dis- 
count of  bills,  184 ;  interest  at  6  per  cent.,  184 ; 
interest  at  5  per  cent.,  186 ;  use  of  interest  tables, 
t'6. ;  interest  on  current  accounts,  187 ;  composi- 
tion for  stamp  duties,  188 ;  time  that  notes  re- 
main in  circulation,  t'6. ;  to  calculate  commis- 
sions, 189;  dividends  on  stock,  t'6.  ;  long  annui- 
ties, 191 ;  stock-brokers'  charges,  t'6.  ;  American 
dollars  and  French  rentes,  191 ;  foreign  bills  of 
exchange,  192 ;  arbitration  of  exchanges,  194 ; 
the  value  of  gold  in  different  countries,  195;  par 
of  exchange,  196;  money  table  of  the  United 
States,  197 ;  value  of  sovereigns  in  America,  198; 
money  table  for  India,  t'6. ;  to  ascertain  how 
many  persons  enter  a  bank  in  the  course  of  a 
day,  199 ;  calculating  boys,  t'6. ;  systems  of  arti- 
ficial memory,  t'6. ;  questions  for  calculation,  201. 

Call  over.  What  is  it,  and  how  should  it  be  per- 
formed? 153,  175. 

Calmness.  A  banker  should  always  maintain  a 
feeling  of,  16 ;  should  observe  it  in  his  reproofs, 
150. 


Organized  the   Edinburgh  clearing-house,  324 ;  |      154. 

LL  445 


Cancelled.    How  is  a  check  cancelled,  and  when) 


A  Treatise  on  Banking. 


-  ,  .:    ,v          •     ' 

andiMoe,  80l 
paki  up,  of  ejolAt-Mnck  teak.  100 ;  evil* 
ef  loo  email  •  opiul.  iA  ;  evil*  of  too  much  r»|> 

;•.,.,.  •  •  :.   ,-    •,    •.  ...        •  . 

lage*  Of  •  nomlftai  c*(>il«l,   IUI  ;    provisions  of 

UM  MW  Act  with  reference  10  capiu!    : 

the  capital  of  all  the  joiat-evock  bank*  la  tin 

—  -  of  each  of  the  >>int  stock  hank*  In  Lon- 
Am.  *W;  of  each  In  the  counter.  3l«;  of  each  In 
of  UM  bank*  In  Ireland,  fie*  Ire- 


Advantage*  they  derive  from  bank*, 

Case  of  need.    What  t*  It  »  30. 

Cash.    Origin  of  the  word,  923. 

account  with  branch**  How  U  It  kept,  169. 

book.  Describe  It  J  167. 

cro.hu.  What  are  they  ?  332  ;  wherein  do 

tbeydinV  from  overdrawn  accounts  ?  333 ;  utility 
of,  333-  335 ;  wherein  they  differ  from diecounu, 

not  adopted  by  the  London  and 

Westminster  Bank,  965;  form  of  bond.  210;  ill- 
•Biniehed  in  Scotland  by  the  Act  of  1835,328; 
their  advantage*,  333;  diminished  in  Ireland  by 
the  run*  for  gold,  3*X 

credit  bond,  forme  of,  210. 

department,  book*  need  in  the.  155. 

Cashier'*  department.  137 ;  hi*  qualification*,  i*  ; 
hi*  deficiencies,  143  ;  check*  on  their  accuracy, 
131. 

Cast,  U>.  or  ea*t  up.  What  I*  it?  166;  bow  to  do 
it  well,  lit,  175. 

Catechism.    An  Index  may  be  u«ed  as  one,  431. 

Cause*.  Of  the  (allure  of  joint-stock  bank*,  113: 
taking  over  the  naeound  businee*  of  private 
banks,  i*. ;  making  advance*  on  dead  eecurity. 
114;  granting  accommodation  to  parties  engaged 
In  speculative  undertaking*,  1 16 ;  a  want  of  sys- 
tem and  discipline  in  conducting  it*  affairs,  117; 
'  ;  no  provision  a?»inst  contingencies,  1 19  ; 


defect*  in  the  constitution  of  the  bank,  the  ap- 
pointment of  incompetent  person*,  or  an  unwise 
distribution  of  the  administrative  function*,  120; 
injudiciooa  proceedings  of  meeting*  of  proprie- 
tor*, 199. 

Csuses  of  the  prosperity  of  the  Provincial  Bank  of 
!••  .  :  H 

Certificate*  of  shares,  form*  of,  203-216. 

Chain  rule.    What  U  It?  194. 

fheege,  small,  obtained  from  bank*.  4. 

Character,  personal,  of  parties.  An  element  in  a 
banker'*  calculation  a*  to  the  credit  they  are  en- 
titled to.  ia 

Chartered  bank*,  354 ;  charter  of  the  Bank  of  En* 
land.  232;  of  the  Bank  of  Ireland,  356 ;  ofbanJu 
In  Scotland,  312-319;  of  the  new  joint-stock 
banks  in  g^ghn^.  309,  389. 

Check-ledger.     Describe  it,  180;    advantage*  of, 


.  J  of  country  bank*,  296. 
Lee*  trouble  to  write  one  than  to  count 
out  the  money,  •;  oeefel  In  prorin*  payment*. 

•  ;  Boet  net  be  drawn  on  a  bank  more  than  fif 
Uen  mUe*  dietaat,  3»;  ahtrald  we  write  "  cheque  " 
or  "cheek,"  12, 

Che^oee.  Are  multiplied  by  the  bneinee*  of  the 
»oek  Eacbaaxe,  «6Vr*illty  of  croeeing,  258. 

•  -•  ,      .•(!,-.  ....  M 

-  clerk.  Hie  deefc,  where  to  be  placed,  138  ; 
hie  qualification..  198  ;  hie  dotlee,  <*.  Vehould  not 
have  nMKhmemMl  labor.  144  :  hi*  office  a  good 


'   -     '    !    • 


(nr  a 


r,  148;  hie  dotie*  often  per- 


by  the  banker,  149. 

MM.    Fora  of  Ihoee  ieened  by  the  Lon- 
and  Weatmineur  Bank,  218. 


Cirenlailon.    Wflkrent  m**nln|r*  of  the  word,  242 ; 
the  Parliamentary  meanlnt,37». 

Cltle*.    Analogy  between  clUee  and  public  eompa- 
ntee,  391. 

Claee  of  enclely  from  which  bank  clerk*  are  usually 
Aej    lift  ' 

Cl**e*i  of  MUe  offered  to  a  hanker  for  discount.  20. 

Claeslncalioa  of  account*  according  to  the  pr»lee- 
eton  of  the  pantee,  l«. 

Uilhsm.  Hie  motion  respertlnf  joint- 
dock  bank*,  K) ;  hi*  queetlon*  to  th»  Uoventur 
of  the  Dank  respecting  the  clearing,  983. 

Clearing.    Between  the  London  banker*.  909;  In- 
craaae  of,  by  the  btwlneee  of  the  Si 

i  clearing  belance-ihcet,  XA;  MM 
transaction*  by  each  banker,  iA. ;  amount  -i  m 
each  month,  867;  book*  connected  with,  263; 
joint  stock  hank*  excluded  from,  981. 

between  the  Bank  of  England  and  the 


London  banker*,  267. 

between  the  bank*  at  Newcastle  upon- 


Tyne,90a 

hoties:  The  preeentment  of  a  bill  (Sir  pay- 
ment there  I*  a  legal  preeenUnent,  36 ;  operation* 
of  the,  described,  m 

Clerk*.  Their  (election  and  appointment,  129 ;  dis- 
tribution of  their  duties,  lot ;  amount  of  their 
ealarie*.  i:«;  their  securities,  135;  the  *y*tem 
of  promotion,  136 ;  the  rule*  of  discipline,  139 ; 
their  holiday*,  Ml ;  training  of  clerk*  for  higher 
office*,  \44 ;  chief  clerk,  where  he  should  he 
placed,  128;  hls<luti. 

Coin.  Origin  of  the  word,  222 ;  the  word  "  money  " 
a  i  M  M  :  I 

Collective  re*|km*lbllity  of  nation*,  390;  families, 
:<•.)!  ;  ciiir...  Xtt ;  puMIc  companiee,  388. 

Commercial  Bank  of  Ix>ndon.  It*  formation,  capi- 
tal, proflta,  dividend*,  and  surplus  funds,  V!75  ;  r.s 
prospectu*.  277. 

-  Exchange  Company  at  Glasgow, 


350. 

Commission  account*  taken  by  tha  London  and 
WMtn.in.ner  Rank,  266,  424. 

Commissions.    How  to  calculate.  189. 

Committees.  Of  the  Lord*  and  Common*,  upon 
the  abolition  of  small  note*  In  Scotland  and  Ire- 
land, in  1826,  extract*  from  their  report*,  312, 
335,  375. 

Committee  of  the  Houee  of  Common*,  on  the  Bank 
of  England  Charter,  In  1832,  67;  extract  fn.in 
the  evidence  of  Mr.  Horaley  Palmer,  63;  ditu/, 
Mr.  George  Glyn,  x'5l. 

of  the  House  of  Common*,  on  joint- 


•lock  hank*,  in  1836,  M ;  extract*  from  their  re- 
port, 3)1. 

•  of  the  House  of  Common*,  on  hanks  of 


446 


Usue,  In  1840,  extract*  from  the  author'*  evidence 
before  them,  240,  243,  lft«. 

of  the  Lord*  and  Common*,  appointwl 

to  inquire  into  the  cause*  of  the  dlstrees 
64 ;  of  the  Houee  of  Common*,  reported  in  favor 
of  the  continuance  of  the  Aa  of  1A14,  65;  of  the 
HOUIM  of  Lord*,  extract*  from  their  report  a*  to 
the  oauM  of  the  distress  of  1347,  64. 

Compensation.    By  the  Aa  of  1844,  to  bank*  that 
issued  Bank  of  England  note*,  968. 

Composition  for  (tamp-duly  on  note*.    How  calcu- 

BE  1-- 

Consol*.    The  belt  kind  of  Government  securities 

for  banker*  to  bold,  44 ;  (houkl  hold  other  stock 

IN  ML 
Constitutional  (ailing*,     A  banker  should  guard 

against.  i:i. 
Convertibility  of  the  bank  note.    What  it  mean*, 

64  ;  the  Act  of  1844  said  to  have  *ecured  it   '/- 
Copland,  Charles,  manager  of  the  Royal  Bank  of 

Ireland,  formerly  a  manager  In  the  Provincial 

Bank  of  Ireland,  370. 
Copper.    It*  specific  gravity,  bow  coined,  196. 


Alphabetical  Index. 


Corn  merchants.  Banka  hare  made  great  losses 
through  advances  to,  116. 

Correlative  terms.  Drawer  drawee,  payer  payee, 
mortgager  mortgagee,  indorser  indorsee,  discount- 
er discountee,  noder  nodee,  30. 

Cotton,  William,  governor  of  the  Bank  of  England 
iu  1844.  His  evidence  as  to  discounting  for 
country  banks  of  issue,  291. 

Coulthart's  Interest  Tables,  188. 

Counterfeit  coin.    Less  through  banking,  5. 

Counters.  Arrangement  of,  in  a  bank,  128 ;  should 
at  all  times  be  properly  appointed,  128. 

Country  banker.  How  affected  in  seasons  of  pres- 
sure, 53 ;  has  greater  facilities  in  obtaining  in- 
formation than  London  bankers,  18. 

Country  bankers.  Advance  money  on  a  deposit  of 
deeds.  26 ;  make  advances  by  way  of  overdraft. 
23. 

banks.    Circulation  of,  restricted  by  the 


Act  of  1344,  236 ;  opinions  of  the  joint-stock 
banks  respecting  the  country  circulation,  357. 
•  department  in  a  bank,  162 ;  what  books 


are  kept  in  the,  163. 


private  banks,  234  ;  the  principles  of  their 
administration,  ib. ;  the  provisions  of  the  Act  of 
1844,  ib. ;  the  regulations  imposed  on  such  as 
are  banks  of  issue  by  the  Act  of  1844,  ib. ;  the 
laws  of  the  currency  with  reference  to  the  coun- 
try banks,  292 ;  examination  of  the  author  on  the 
subject  by  Sir  Robert  Peel,  294 ;  the  clearing  be- 
tween country  banks,  297. 

Courtesy.  Of  managers,  106  ;  of  clerks,  400 ;  of 
shareholders,  ib. ;  of  directors,  402 ;  of  annual 
reports,  400. 

Credit-book.     Describe  it,  163. 

Credits  on  agents.    How  entered  in  the  books,  167. 

Cross  firing.    What  is  it  ?  .27. 

Crossing  of  cheques.    The  uses  of,  258. 

Currency  and  banking.  "  A  Review  of  some  of 
the  Principles  and  Plans  that  have  recently  en- 
gaged public  attention  with  reference  to  the  Ad- 
ministration of  the  Currency,"  a  quotation  from, 
in  reference  to  the  principle  of  the  Act  of  1844, 
62. 

Customers.  A  banker  should  get  a  knowledge  of 
his,  17. 

books.  Should  be  correctly  and  neatly 

written  up,  143;  are  checked  against  the  ledger, 
ib. 

Cutbill,  Alfred  R.,  manager  of  the  Commercial 
Bank  of  London,  previously  sub- manager  of  the 
London  and  County  Bank,  275. 

DAILY  balance.    Describe  it,  146,  169. 

Danish  bill  of  exchange.    The  form  of  one,  39. 

Dates.  Bank  of  England  commenced  1694,  present 
charter  to  expire  at  the  expiration  of  twelve 
months'  notice  to  be  given  after  the  1st  day  of 
August,  1855,  237. 

The  London  and  Westminster  Bank,  opened 

on  the  Wth  March,  1834,  259 ;  the  London  Joint- 
stock  Bank  on  t/te  21st  November,  1836,  270 ;  the 
Union  Bank  of  London,  on  the  4th  February, 

1839,  274 ;  the  Commercial  Bank  of  London  in 

1840,  275;   the  London  and  County   Bank,  in 
September,  1836,  277. 

of  the  establishment  of  all  the  joint-stock 

banks  in  England,  302;  of  those  that  have  ceased 
305,306. 

——  of  the  origin  of  the  banks  in  Scotland,  315 ; 
of  the  provisions  of  the  Act  of  1845  in  Scotland, 
313;  in  Ireland,  352. 

. The  Bank  of  Ireland  commenced  the  25th 

June,  1733;  Provincial  Bank  in  1825;  National 
Bank  in  1331;  Hibernian  Bank  in  1824;  Royal 
Bank  in  1836;  Northern  Bank  in  1825;  Belfast 
Banking  Company  in  1827 ;  Ulster  Bank  in 
1837.  See  these  banks. 

.  Act  of  HI  1  was  suspended  on  the  2~}th  Oc- 


tober, 1847,  247;  suspension  removed  on  the  23d 
November,  1847,  243. 

David.    His  gratitude  and  humility,  404. 

Day-book.    Describe  it,  157. 

Days.  The  number  of,  that  Bank  of  England  notes, 
of  various  denominations,  remain  in  circulation, 
189. 

Dead  loans.  How  they  arise,  20 ;  cannot  be  called 
up  in  seasons  of  pressure,  58. 

security.    Some  banks  have  lost  money  by 

making  advances  on,  23,  114. 

Debt,  National.    The  amount  of,  51. 

Decision.    Very  necessary  in  a  banker,  13,  107. 

Declarations  of  secrecy.  Form  of,  signed  by  direc- 
tors and  officers  of  joint-stock  banks,  207. 

Deed  of  settlement,  205 ;  provisions  of,  with  re- 
gard to  altering  the  regulations  of  the  company, 
301 ;  as  to  the  mode  of  conducting  the  business 
of  banking,  t'6. ;  as  to  the  degree  of  publicity  to 
be  given  to  the  proceedings,  t'6. ;  as  to  the  terms 
on  which  the  company  is  to  be  dissolved,  3U2 ; 
provisions  of,  under  the  new  Act,  309. 

of  transfer.    Form  of,  216. 

Deeds  lodged  as  security  for  loans.  Rules  to  be  ob- 
served respecting,  25. 

Defects  of  character  in  a  banker,  13. 

Deficiencies  of  cashiers.    How  provided  for,  143. 

Department  of  tellers,  136;  of  cashiers,  137;  of  ac- 
countants, ib. 

Deposit  receipts.    Form  of,  213  ;  use  of,  429. 

Deposit-receipt-book.    Describe  it,  158. 

Deposits  in  a  bank.  Are  reduced  in  seasons  of 
pressure,  58 ;  the  system  of,  in  Scotland.  336. 

Amount  of,  in  each  of  the  joint-stock 


banks  of  London,  230. 

Desks.    Arrangement  of,  in  a  bank,  123. 

Difference  between  the  pressures  of  IS'36  and  1839, 
56. 

Diligence  in  business,  a  source  of  wealth,  417. 

Direction,  or  notice,  left  by  a  bank  clerk  when  a 
bill  is  not  paid  on  presentation,  32. 

Director.  Should  be  a  man  enjoying  public  confi- 
dence, 102 ;  should  possess  a  knowledge  of  com- 
mercial business,  103;  should  be  a  man  of  strict 
integrity,  ib. ;  a  man  of  influence  and  respecta- 
bility, ib.  ;  in  good  pecuniary  circumstances, 
104 ;  should  have  time  to  give  attention  to  the 
bank,  ib. 

Directors.  At  first  they  had  no  banking  experience, 
121 ;  were  chosen  because  out  of  business,  ib.  ; 
evil  of  managing  directors,  122,  348 ;  and  secret 
committees,  f22 ;  provisions  of  the  new  Act  re- 
specting, 309,  382. 

of  the  Bank  of  England.    Their  number 


and  qualifications,  83;  have  always  been  liberal 
towards  the  clerks  of  the  establishment,  136. 
Ireland,  356,  382. 


Discipline.    Rules  of,  in  a  bank/118,  139. 
Discount  of  bills.    Mode  of  calculating,  184. 
Discount  balance  book.    Describe  it,  16. 


179. 


-journal.    Describe  it,  159. 

-  ledger.    Describe  it,  159. 

•  register.    Describe  it,  159  ;   abolition  of, 

Discounting  bills.  Lar?e  part  of  a  banker's  busi- 
ness, 20 ;  classes  of  bills  offered  for  discount,  ib. ; 
rules  of,  21 ;  points  of  examination  with  refer- 
ence to  bills  discounted,  ib.,  28. 

Discrimination  of  character.  A  necessary  qualifi- 
cation in  a  banker,  15. 

Dissolution  of  a  banking  company.  How  made, 
302. 

Dividends,  high.  Bankers  should  not  expect  them 
under  the  Act  of  1844,  80. 

-  rate  of,  paid  by  the  joint-stock  banks  of 


London,  230;  by  the  country  joint-stock  banks, 
302 ;  paid  by  each  bank  in  Scotland,  315. 


to  calculate,  189. 


447 


Division  of  labor.    Necejjary  in  a  bank,  131,  174. 


A  TVeotfM  on  Banking. 


Divtee  Chancier.  A  toreJy  exhibition  of  UM,  In 
UM  word*.  ••  He  hath  pleasure  IB  the  prosperity 
of  hM  servant*,"  4Ut 

A  banker  BhomU  not  make  ad  van 
the  accoin- 

*TW* 
ed  with  the  IbreWpMi  of  B 


expectation  of  life,  831 
PnsjUi  Dlrtf*  No*.    Tbe  motto  of  the  City 

I       !     • 


*V;  iheawdof  eMUement,  806;  bond* of  escu- 

»for  the  offlcer*.  16  ;  declarationa  of  secrecy, 
:  letters  of  guarantee,  80S ;  letters  on  lodging 
deeds  or  other  **cunt tea,  809 ;  memorandum  of 
aftMOMnt  with  reference  to  deeds.  16. :  cash 
credit  bond,  810:  letters  of  credit.  818;  deposit 
rscMpu.  813:  requiiltton  notes,  it. ;  letter  call- 
Inf  B  general  meeUBf,  816;  special  contracts, 
8lt;  BMlce*  of  calls,  it  ;  certlncat**  of  shares. 
•». ;  deed  of  transfer.  818 ;  circular  note*  Issued 
by  UM  Liae'ln  aad  Westminster  bank,  16.  ;  a  ta- 
bis  showing  ths  relative  value  of  gold  In  London 
and  Pans,  Hamburgh  Bad  Amsterdam,  221 :  a 

•  i  .  •  .  :    •      •      — 

band  of  the  OearBBte*  Society,  884;  Provident 
"  Bt  Fund,  886;  term*  of  emving* 
830;  companUve  view  of  the 


of 


Doable  «*try,  book  keeping  by.    Daecrib*  It,  181. 

Draught,  or  draft,  which  •hould  w.  write  1  1 1. 

Dmdia  Bank.    Extract  from  their  proepactut,  321. 

PaiCfc  bill  at  MClMiifa.    Tbe  form  of  one,  39. 

total.  Eo«IMi  OKMM7  raducwl  Into,  2O. 

:  i   .        •     •        :   i  - 

of  public  eomnanlaa,  MS.  1.  Dutiee  of  pat- 

riotUin,  3B.  —  i  butt*  of  foclal  ntUttoMhip, 
aa&.  — a  DMMB  or  raUfVm,  401  —4.  Dutiee  of 
beoemUoce,  407. 

EA«T  lodift  bond*.    Banker*'  Inve^menta  In.  45. 

Economy,  domartte.     PromoKJ  by  banking,  6. 

ebould  not  be  too  Mrictly  regarded  by 

public  eompanlaa.  In  their  expenditure,  394  ;  In 
their  ImlldiW  19S;  In  their  nlariea,  1M;  in 
their  bnepiuJily,  400;  In  their  peii*loae,  401. 

B*nailnn.  The  doty  of  educating  the  poor  bind 
lAf  OB  public  eompaniee,  406;  way.  in  which 
the  duty  .hould  be  discharged,  407. 

i.  •.    •  .-  •  -..•••:.•..'•! 

tion  in  a  candidate  far  the  office  of  bauk  clerk, 

130. 
aflbctontiM  population,  410;  adrantam 

to  bank*  of  having  educated  aerranu,  412;  many 

public  companim  owe  their  exialwice  to.  41 1 . 
EoclMBajinnay.     Baducad  into  Prua»ian,  Frank  fort, 

DMCB,  and  French  coin,  222. 
ployment  pnTiooa.    To  be  inquired  Into  before 


IB*  a  bank  clerk.  !.«' 
Envy.    The  prosperity  of  the  wicked  should  not  be 

.     .      •    :    . 
Equivalent  number*.   Great  facUitle*  to  calculation 

bv  eabrtiiutmr  199. 
Evil  spsakmx  shnold  not  b*  practlead  between  pub- 

,       • 

toB*jtaat»oa  of  the  author  by  fSr  Rnbert  Peel,  on 
the  clreolaiton  of  country  bank*,  894. 
:       •••••• 

i  hanks  and  eompanle*,  34C ;  letter  of  the 
her  respecting.  16  ;  extract  from  Mr.  Kin- 
rt  Baejphlit  respecting,  349;   those  estab- 
I  IB  Scotland,  3SO 

Between  banker*  m  London,  858;  be- 
iksrs  la  th*  cowury,  897;   between 
m  aeaUaad,  an.  344  :  to  Ireland,  363; 
m  Newcastleoa-Tyas.  868.    Om  "  Clearing." 
-  Bue'fB,  aafaroribls.  nnally  precede* 

ft  MftMMI  of  pC*WMiW*  <BHL      JWf  rOTVtf  n . 

BMCMOT     fThnejIll  open  B  atparau  account  at  a 

....    ;. 


Mile,    A  banker  may  hare  to  e»U  or 
borrow  on  them  In  aaaaone  of  preeeure.  58 ;  Inane 
on,  refuted  by  the  bank  In  April.  . 
bank*  kaap  their  reeervee  In,  46;  Bank  of  ting- 
land  did  eo,  but  have  changed  for  Block,  44. 
ExtMCUlkm  of  Ufa.    A  abort  mod*  of  ascertaining, 

Expandltura.  A  record  of,  preserved  by  keeping  a 
banker,  0;  enumerate  the  account*  that  are 
placed  under  thi*  head  In  the  general  ledger,  Iflfl  ; 
how  entered  In  the  broke,  160. 

of  a  bank.    W  hat  are  they  1  8, 166. 


KAiir»«.  When  a  banker  failed  In  Italy  his  bench 
was  broken  by  the  populace,  1 ;  signs  of  ap- 
proaching failure,  27. 

Failures  of  joint-stock  bank*.  Cause*  of,  113; 
number  of,  306. 

False  dealing  forbidden,  396. 

Families.  Analogy  between  families  and  public 
companies,  391 ;  instances  of  families  being  re- 
warded or  punished  for  their  actions,  3!tt. 

Farthing.    Origin  of  the  word,  VU4. 

Figures.    Should  be  made  plain.  I  '•! 

Kir  IIIIIIMB.     Want  of,  a  defect  in  a  banker,  13. 

Fluctuation*.  Great  in  the  amount  of  the  circula- 
tion, the  rate  of  Interest,  and  the  price  of  the 
public  securities,  during  1847,  G6 ;  their  effect  on 


Foreign  bill*  of  exchange  may  be  accent  rd  verbally, 
31 ;  always  protested  for  non-acceptance  or  n»u- 
payment,  32;  usually  drawn  In  eels,  31  ;  often 
drawn  at  a  usance,  31 ;  bilU  drawn 
or  Ireland  are  considered  as  foreign,  iV  ;  : 
In  several  languages,  39. 

Foreign  countries,  bill*  on.  How  they  arias,  192: 
how  calculated,  I'M  ;  arbitration  of  exchanges, 
194. 

exchangee.    Country  banker*  do  not  reg- 


ulaie their  Issues  by,  296. 

may   be   adjusted   by   other 


mean*  than  the  tran«mi**ion  of  gold,  00. 

Forgeries.  Various  kinds  of,  21 ;  how  to  guard 
agatnil,  22;  in  signing  deeds.  16. 

Form.  Of  a  bill  of  exchange,  29;  of  a  promimory 
note,  :«);  of  a  cheque,  32. 

Foster,  B.  F.  His  -Bookkeeping"  quoted,  1"0, 
176. 

Prance.  Bank  of.  Formed  in  l-<n.  4.11;  I*  gov- 
erned by  a  governor,  two  sub-governors,  three 
receivers  general,  three  censors,  airl  twelve  or.li- 
nary  directors,  16. :  how  sre  they  paid,  16. ;  -re 
rate  of  interest  charged,  4.'i5 ;  principles  of  man- 
agement, f'6. ;  their  circulation  of  notes,  430. 
branches,  ib  ;  connection  with  the  government, 
433;  Its  condition,  439. 

Francin,  John.  Hi«  "History  of  the  Bank  of  Eng- 
land "  quoted,  176. 

Frankfort  coin.     Knellih  money  reduced  Into,  222. 

Free-trade  in  hanking  does  not  produce  numerous 
banks,  hut  the  revrr  • 

French.    Form  of  a  bill  of  exchange  drawn 

coin.    English  money  reduced  into,  '<Ui. 

stock.    How  calculated,  1'jl. 

GAMILMS.    Banker*  should  discountenance,  7. 
OBfjating  in  the  funds  or  in  share*.    Bankers'cleiki 

should  not  do  so,  144. 
Gardening.    A  highly  beneficial  recreation  for  bank 

clerks,  141. 
General  account  of  cash.    How  kept  in  the  book*, 

;  *  ' 

balance  book.    Deecribe  It,  16,  100. 

ledger.      Describe  thi*  most  important 

book.  165;  bow  are  the  accounts  classified  7  IV: ; 

how  is  It  pouted  from  the  day-book  ?  1G.">    . 

It  kept  by  double  entry  1  I -I. 
principle*.    A  banker  should  always  have 

then. 


Alphabetical  Index. 


e    ea      o       er  cers,        . 
Hewat,  Thomas.    The  secretary  of  the  Provincial 


, 
nto  the  Causes  of  the  Pressure  on  the  Money 


Market  during  the  year  1839,  52,  72,  81  ;  extracts 


,      ,      , 
from  his  Currency  and  Banking,  reprinted  from 


, 

the  Westminster  Revieto,  62,  318,  323  ;  extracts 
from  his  letters  of  Nehemiah,  74,  76,  288  ;  extracts 
from  his  Laws  of  the  Currency,  published  in  the 
Foreign  and  Colonial  Review,  241,  292,  327, 
372  •  extracts  from  his  History  of  Banking  in 
America,  22,  55,  72,  99,  197;  extracts  from  his 
History  of  Banking  in  Ireland,  354,  333  ;  extracts 
from  his  Lectures  on  Ancient  Commerce,  14,  147, 
151  ;  extracts  from  his  Evidence  before  a  Com- 
mittee of  the  House  of  Commois,  respecting  one 
bank  of  issue,  243  ;  ditto,  ditto,  respecting  the 
circulation  of  country  banks,  294  ;  ditto,  ditto, 
respecting  the  circulation  of  Ireland,  373. 

Gladstone,  J.,  M.  p.    His  evidence  upon  the  bill  cir- 
culation in  Lancashire,  40. 

Glasgow  Exchange  Company,  351. 

GlyrT,  George  Carr,  M.  P.    His  evidence  respecting 
the  London  bankers  in  1832,  251  ;  his  questions 


, 

respecting  the  clearing,  258;   his  anticipations 
respecting  the  issues  of  the  Bank  of  England,  67. 

Gold.  How  weighed,  195  ;  how  coined,  196  ;  its 
specific  gravity,  ib.  ;  the  amount  in  circula- 
tion, ib. 

Goldsmiths,  Company  of.  Formerly  most  bankers 
belonged  to  that  company,  1. 

Goodness.  Always  associated  with  some  degree  of 
wisdom,  131. 

Government  securities.  The  Bank  of  England  pre- 
fer holding  stock  to  exchequer  bills,  45;  amount 
held  by  them  in  September,  1844,  84;  and  at  oth- 
er times.  97;  bankers  will  probably  hold  a  less 
amount  from  their  experience  of  the  Act  of  1844, 
77  ;  proper  for  bankers  to  hold  their  reserves  in, 
44,  48. 

Grace.  Three  days  of,  allowed  on  bills  of  exchange, 
30. 

Grammar.  Is  the  word  bank  a  singular  or  a  plural 
noun  ?  8  ;  should  we  write  accepter,  or  acceptor  1 
10;  indorse,  or  endorse)  11;  indorsement,  or  in- 
dorsation t  ib.  ;  presentment,  or  presentation  ? 
12;  draught,  or  draft?  ib.  ;  check,  or  cheque?  ib. 

Gratitude,  debt  of.  Due  from  public  companies  to 
the  cause  of  mental  cultivation,  411. 

Grey,  Dr.     Hia  system  of  artificial  memory,  200. 

Groat.    Origin  of  the  word,  223. 

Grudzing.  Hospitality  should  be  exercised  with- 
out". 403;  and  also  benevolence,  410; 

Guarantee  Societies,  135  ;  form  of  their  bond,  224. 

-  Fund.     See  Surplus  Fund. 

Guinea.    Why  a  gold  coin  was  so  called,  223. 

Giimey,  Samuel.  His  opinion  as  to  bankers  hold- 
ing their  reserves  in  bills  of  exchange,  47. 

HABITS.  How  formed,  430;  imprudent,  voluptu- 
ousness, drunkenness,  gluttony,  idleness,  sloth, 
gay  company,  improvidence,  gossiping,  tend  to 
poverty,  417. 

of  business.    What  are  they  ?  146. 


--  .  . 

Half-yearly  balance.     What  is  then  done  1  171 


171. 


book.    What  does  it  contain  t 

sheet.    Describe  it,  173. 

Hamburg.  Way  of  estimating  the  relative  value 
of  gold  in,  196. 

Happiness.  Outward  circumstances  no  certain  in- 
dex of,  413. 

Head-office.  List  of  all  the  joint-stock  banks  in 
England,  arranged  alphabetically  according  to 
the  bead-office,  302. 

LL* 


OdllK.  Ul  licialiu,  ouu. 

Hibernian  Bank,  369  ;  its  origin,  t'6. ;  obtained  an 
Act  to  sue  and  be  sued  by  its  registered  officer, 
t'6. ;  the  last  statement  of  its  affairs,  370. 

High  salaries  to  clerks.    Not  advisable  at  first,  134. 

History  and  Principles  of  Banking.  Quoted  with 
reference  to  bills  offered  for  discount,  20. 

-  of  banking  in  America.    Quoted  with  ref- 


erence to  the  re-discounting  of  bills,  22;  with 
reference  to  pressures,  55,  72 ;  with  reference  to 
joint-stock  banks,  99  ;  with  reference  to  the  coins 
of  the  United  States,  197. 

Hoardins.  The  effect  of  panic,  72 ;  the  extent  of 
in  1847,  73. 

Holidays.  All  clerks  should  have,  141 ;  promote 
their  health  and  mental  energy,  142;  a  means  of 
improving  the  clerks,  t'6.,  145;  a  security  for 
their  honesty,  142;  rules  of  the  Bank  of  England 
with  regard  to,  143. 

Honiton  Bank.    Neglectful  in  book-keeping,  117. 

Honor  Deo.  The  motto  of  the  Mercers'  Company. 
405. 

Honor.    Acceptance  for  honor;  what  is  it?  31. 

Horizontal  system  of  book-keeping.  Describe  it, 
176  ;  what  are  its  advantages  ?  178. 

Hospitality.  Cases  in  which  public  companies 
should  exercise  it,  401. 

IGNORANCE.  To  remove  the  ignorance  of  the  poor 
is  as  much  a  duty  as  to  relieve  their  distress,  410. 

Illegal  considerations  for  a  bill  of  exchange.  Such 
bills  cannot  be  enforced  by  the  drawers,  but  may 
by  third  parties  who  had  no  knowledge  of  the 
illegal  consideration,  33. 

Illness  of  Clerks.    Inconveniences  of,  140;  means 
of  preventing,  t'6. ;  conduct  of  the  Bank  of  Eng- 
land with  respect  to,  141 ;  why  should  not  banks  ' 
engage  medical  men  to  attend  to?  141. 

Impartial  system  of  promotion.  Tends  to  the  im- 
provement of  the  clerks,  145. 

Improvements  in  book-keeping,  174 ;  what  is  their 
object?  176. 

Inconvertible  security.  A  banker  should  not  make 
advances  on,  23. 

Independence  of  mind  essential  to  the  development 
of  the  intellectual  character,  149. 

Index.  Uses  of,  —  is  a  reference  to  what  we  have 
read,  —  will  remind  us  of  what  we  have  forgot- 
ten, —  frequent  perusal  of,  will  impress  the  book 
on  our  memory,  —  will  present  in  one  view  all 
that  is  said  on  the  same  subject,  —  a  means  of 
self  examination,  —  a  catechism,  —  a  syllabus, 
—  points  out  those  topics  on  which  we  may  de- 
sire information,  —enlivens  the  attention,  430,431. 

India.  Money  table  for,  198;  exchange  with,  ib.; 
how  regulated  by  the  East  India  Company,  ib.  ; 
how  exchange  operations  are  conducted  there, 
341 ;  form  of  bills  remitted  thither  by  the  Scot- 
tish banks,  343 ;  the  Bank  of  England  issue  bank 
post  bills  in  sets,  at  60  days'  sight,  for  remittance 
thither,  344. 

Indorsement  of  a  bill  of  exchange.  May  be  either 
general  or  special,  29 ;  where  it  should  lie  placed, 
30;  should  we  write  indorsement  or  indorsation* 
1 1 ;  indorse  or  endorse,  id. 

Industrious  classes.  System  of  deposits  useful  to. 
337,  339. 

Information.  Kind  of,  given  by  bankers  to  each 
other,  6;  given  by  a  hanker  to  his  customer,  7; 
means  of  obtaining  and  recording,  16;  country 
bankers  have  great  facilities  in  obtaining,  18. 

449 


A  Treat isr  on  Banking. 


iv>*rrlh*  lu  Important 
MAr  for  KM  laud*  «f  thoa*  with 

. 

th»  OSMII  af  th> 


Jtfarkat  Atrhaj  UM  raaf Ms*.  Qoatttion* 

Daacrtb*  It,  16. 

ibte.    A  bajiker  should  know  how 
tarhoos*.  15. 

eapanUa.    Their  Incraaa*  owtnf  to  the 
attention  paid  to  vital  statlstk*.  410; 

• ••    •    . 

i.       -  .       •       •    ,.•  •  • 

.     .      . 


.        ':    M         .-• 

MttelM  Mt  food  eerunlv  for  bankers'  advance*. 
»;  the  Uahed  GwrantM  And  Lift  Aawmnca 


Oampacr?,  135;  UM  Provident 

Inwreai    A  low  rate  of,  usually  pracada*  a  eaaaon 
--   •<  -i 

-  bow  to  calculate,  HI 

-  man  than  5  per  cent  cannot  be  charged 
where  the  •rarity  i*  real  property,  96. 


MMrally  by 


on  deposit*.    Allowed 
ly  by  London  banker* 


I  br  banker*.  3 ;  not 
i.  ib.  ;  advantages  of, 

win  advance  In   aeaaoni  of 

••• 

-taNee.     Reader's,  186;   Oilman1*,   188; 
Obulthar.rs.iA. 

what  le  th*  practice  of  the  London  private 

....  .-.;..,..  i     .'„. 

atock  bantotjBVr-MB,  »,  971,  979,  278;  the 

cmmtrv  bank*  75  343 :  the  bank*  of  Scotland  1  3. 

the bankaef  Intend)  368,381;  the 

Baak  of  England  1237.238;  what  ratwhaaihe 

,..,..,...  ....     ... 

.        -.,     ,•    .••     :-    ......   ..-      ...     ,  . 

apon  the  market  rate  of  intereet,  68,  93;  what 

connection  hi  there  between  rate*  of  internet  and 

aaawm*  of  anaeutetinn  or  pressure,  53, 60,  66,  69; 

hnw  It  elteck*  the  exce**l  ve  issue  of  note*  996, 

3*5;  what  aflheu  are  produced  on,  by  the  Act  of 

49,  77,  91 ;  what  are  the  rarion*  mode*  of 

calculating  194-  18S;  what  rate*  are  charged  by 

the  Bank  of  France?  436;  and  the  Bank*  in 

.    :    - 

lourvMws  between  ft  banker  and  his  curtomen 

*  thoold  be  short,  16. 

larasunent*.    Eoatnerale  the  account*  that   are 

placad  under  thi*  head  in  the  general  ledger,  166; 

how  entered  hi  the  hooka,  167 ;  In  foreign  stocks, 

-  speculative.    Uauallr  precede  a  eea- 


am  of  . 

Ireland.    Bills  drawn  from,  regarded  a*  foreign.  31 

bank*  of,  358;  provision*  of  the  Art  ,,f 

IMS,  ib. :  the  Bank  of  Ireland,  354  ;  the  Provin- 
cial Bank  of  Intend.  3S8;  the  National  Bank  of 
Intend.  367;  the  Hibernian  Bank.  369 ;  the  Roy- 
al Bvik  of  Ireland.  370 ;  the  private  bank*  in 
354 :  the  Northern,  Belfan,  and  Ulster 
at  Bella*.  371  ;  the  Tvperary  Joint 
awck  Bank,  379 :  the  laws  of  the  Currency  In 
Ireland.  i»:  the  abolition  of  note*  tinder  £6. 
•75:  reapectlve  bearing*  of  the  Act*  of  1844  and 
IMC  (7  and  8  Viet,  cap  32 ;  7  and  8  Viet.  cap. 
.  .d  9  and  10  Viet.,  cap.  85)  upon  the  bank* 
of  Eedand.  Scotland,  and  Ireland.  3«;  settle- 
ment of  the  •xchanre.  in  Dublin,  383. 

Isle  of  Mao.  Two  joint  stock  bank*  hare  failed 
than  VII. 

We  of  Wight.  A  joint  stork  bank  then  took 
the  tiueinsae  of  a  private  bank,  114;  after- 
ward* merged  to  the  National  Provincial  Bank, 
'•  - 

b*M  rvpaninant  of  the  Bnk  of  Bnfland.  Is  re- 
Mirerf  to  gir*  not**  for  fold,  at  the  rat*  of  £  3 
17.  9*t.  peroMca,  •;  not  t*  kme  tnor*  than 


£  1 1  nnn.nno  acalMt  a«ciiritlee  from 
Jknt  day  ofAufutl.  l«44.  «M. 

,  In  any  pan  of  the 

/  .,      •          ,  ,    ,  .   .     ,  .       •   . 

•iirtA  da,  o/ Afav,  IHM,  ih.ll  hare  the  power  o( 
lawlM  noua,SM;  the aroount  of  note*  a  country 

'      •          L    •  •  '  '        ,      ,  ,  ' 

arerace  amount  In  circulation  during  the  twelve 
week*  endlnc  the  fMMy-MMii/A  day  ,;  • 
1944,  M5 ;  upon  an  avenue  of  four  weak*,  DO 
banker  mu*t  have  more  than  the  above  amount 
In  circulation  from  the  tenth  day  of  Ottobtr, 

.    No  bank  can  leroe  notee  In  Scotland  or 

Ireland,  who  did  not  l*eue  on  the  fnl  day  of 
May,  1845.  313;  the  fixed  lueue  of  each  bank  I* 
the  average  amount  It  had  In  circulation  during 
the  year  ending  the  Jirtt  day  of  M 
upon  the  average  of  four  wmk*.  no  bank  to  have 
In  circulation  a  larger  amount  than  thi*  fixed 
iwoe.  after  the  riztH  day  of  December,  1846,  ib, 

Italian  bill  of  exchange.    The  form  of  one,  39. 

jACKaoir,  John  Sunway.    Manager  of  the  Bank  of 

M    M,T         «'-. 

Jamee,  Paul  Moon.  His  opinion  a*  to  banker* 
holding  their  reserve*  in  bill*  of  excnaoga,  46. 

Job.  HI*  controversy  with  hti  frieixU,  412;  hi* 
reflection*,  when  In  diilreaa,  on  hi*  previous 
coiulurt  towanl*  hi*  wrraul*,  VU;  hi*  kinrtneee 
to  the  poor,  413. 

Junii  ni.K-k  bank*.     Committee  of  the  Houae  of 

•  :i*    reepectlng,    53 ;    their    report,    64  ; 
point*  in  which  they  differ  frmn  prival*  hank*, 
99;  their  paid-up  capital,  100;  are  governed  by 
a  board  of  director*,  102 ;   have  a  chief  officer, 
called  a  manager,  KM ;  distribution  of  their  ad- 

-  iiirn  fuiirtion*,  107  ;  advantage*  of  their 
branrhe*,  1H6;  their  annual  meeting*  of  share- 
holilrn,  114;   their  balance    aheet*,  to.;   their 
profits,    and    the    mode*  of  dlttribulion,    112; 
CMiieea  of  their  (allure*  114;  their  advantage*, 
278.    fiteCauae*.  ' 

In  London.    Point*  on  which 


they  iliflrr  from  the  private  bankers,  263;  num- 
ber of  partner*,  io. ;  a  known  amount  of  capital, 
264;  grant  interact  on  lodgment*,  265;  no 
Chri*tmas  boxes  to  clerk*,  ib. ;  have  branches, 
966.  Point*  In  which  they  differ  from  each 
other:  —  three  give  interest  on  the  minimum 
balance  of  a  current  account,  270.  272.  274,  279; 
two  take  commission  account*,  264,  279;  one  has 
branch**  in  the  country.  278. 

in  the  country.     Origin  of, 


300;  provisions  of  their  deed*  of  aettlrment.  .'»i|  ; 
a  list  of  those  now  In  existence.  3Oi;  of  thorn 
that  have  stopped  payment,  ••<•'..  »(  thixe  that 
have  wound  up.  16. ;  of  those  that  have  (topped 
and  resumed,  307;  of  those  that  have  merged  in 
other  ioint-rtock  hanks,  i*. :  *ft.  also,  431. 
Journal.  Merchant*',  describe  it,  160 ;  bill  journal 
and  discount  journal,  169. 


KKBPINO'  a  banker.  What  I*  it  f  424  ;  more  gener- 
al in  Scotland  than  in  Enelan<l.  ib.  •  reaaon*  for 
il.iinir  so.  425;  which  banker  should  we  choow, 
426;  mod*  of  opening  and  keeping  the  account, 
ib  :  interview*  with  the  banker 

Kindnea*  to  the  poor.  A  vource  of  wealth, 
417. 

Kinnear,  George,  manafwr  of  the  Commercial  Ex- 
r.hanre  Comt»uiy.  Extract*  from  hi*  letter  to 
Mr.  Blair,  349 :  extract*  from  hi*  pamphlet  on 
Exchange  Companies,  ib. 

Knowledge.    The  advantages  of.  406. 

of  hi*  customers,  of  great  Impartanca 


to  a  talker,  17. 


Alphabetical  Index. 


LAPOH.  Division  of,  among  clerks,  131 ;  one  of- 
fice should  be  a  training  for  the  next  above  it, 
145. 

Laooring  classes.  Advantages  they  derive  from 
banks,  337,  339. 

Lancashire,  circulation  of.  Consisted  mainly  of 
bills  of  exchange.  40 ;  how  altered,  t'6. 

Large  accounts.  Should  not  be  taken  by  small 
bankers,  19.  • 

advances  to  one  customer.    Not  desirable, 
116. 

banks.    The  formation  of,  prevented  by  the 

Act  of  1844,  237.  . 

Laws  of  the  currency.  With  reference  to  the  Bank 
of  England.  240;  to  the  country  banks,  292 ;  to 
Scotland,  327 ;  to  Ireland,  372. 

Law  suits.  Rules  to  be  observed  with  respect  to 
them,  398. 

Lawyers.  Opinions  of,  with  regard  to  a  special  fol- 
lowing a  general  indorsement  of  a  bill  of  ex- 
change, 29 :  banks  should  employ  none  but  hon- 
est ones,  400. 

Leal  ham,  Mr.  His  calculation  as  to  ihe  amount 
of  bills  of  exchange  in  circulation,  40,  41. 

Lectures  on  ancient  commerce.  Quotations  from, 
on  the  amusements  of  a  merchant,  14 ;  on  bad 
writing,  151 ;  on  habits  of  business,  146. 

Ledger,  current  accouiu.  Describe  it,  1^8;  pro- 
gressive, describe  it,  t'6. 

general.  Describe  it,  165;  merchant's,  de- 
scribe it,  131. 

keeper.    His  desk,  where  placed,  128. 

Leeds.  A  bank  that  failed  there  is  said  to  have  ad- 
vanced money  on  shares,  116:  its  banks  have 
sometimes  advanced  money  an  mills,  115. 

Legislation.  Has  made  banks  too  numerous,  318 ; 
prevents  the  formation  of  large  banks  of  issue, 

St. 

1  letters  addressed  to  the  author.  By  Mr.  Robert 
Bell,  .320,  325 ;  by  an  Irish  banker,  334 :  from  In- 
dia, 341. 

— —  between  the  Government  and  the  Bank,  re- 
specting the  Act  of  1844,  247. 

— —  of  bankers.    Form  of,  162. 

of  credit.    Form  of,  212. 

of  guarantee.    Forms  of,  208 ;  of  deposit  of 

deeds,  209;  of  credit,  212. 

•  addressed  to  banks,  as  security 


for  bills  discounted,  208;  to  accompany  a  lodg- 
ment of  deeds,  209. 

of  Nehemiah.    Quoted,  74,  76,  288. 

to  a  branch  manager.    Quoted,  18. 

to  shareholders.     Forms  of,  203,  215. 

Lettre  d'Indication.     What  is  it  ?  218. 

Liability  of  shareholders  in  joint-stock  banks. 
Not  limited  by  charters  granted  under  the  new 
Act,  310. 

— — —  in  the  Guarantee  Society  the  shareholders 
are  not  liable  on  their  policies  beyond  the 
amount  of  their  shares,  225 ;  and  ratably  only 
with  other  parties,  226. 

Liberality  in  the  cause  of  religion.  A  source 
of  wealth,  406,  418;  rules  for  its  exercise, 
410. 

Library,  a  banking.    Every  bank  should  have,  148. 

Licenses  to  issue  notes.  Alteration  made  by  the 
Act  of  1844,  237. 

Life  policies.  A  banker  should  not  make  advances 
on,  26 ;  the  value  of,  27. 

Light.  Regard  should  be  paid  to,  in  fitting  up  an 
office,  127 ;  prevents  mistakes,  123 ;  produces 
cheerfulness,  t'6. ;  how  it  should  fall.  ib. 

Ijsts.     Describe  the  books  so  called,  160. 

Lit-erary  societies.  Bank  managers  should  pro- 
mote, 412. 

Liverpool  bankers  have  made  advances  on  cot- 
ion,  i-\. 

Loans,  to  stock  or  bill  brokers,  48 ;  loans  to  clerks, 
144,228. 


Loans.  How  made  in  London,  and  how  in  th« 
country,  23 ;  when  are  they  dead  1  ib.  ;  quotation 
from  Mr.  Taylor,  respecting,  25;  how  entered  in 
the  books,  163. 

and  discounts.    The  demand  for  them  will 

increase  in  seasons  of  pressure,  53. 

Local  directors  of  branches.  Not  now  appointed 
generally  in  England,  119;  of  the  Provincial 
Bank  of  Ireland,  362. 

Locality.    What  is  the  best  fora  bank  ?  126. 

Lodgments.  Enumerate  the  accounts  that  are 
placed  under  this  head  in  the  general  ledger,  166. 

London  bankers  give  information  to  each  other, 
6;  do  not  reissue  country  notes  or  bills  of  ex- 
change, 251 ;  difference  between1  City  and  West- 
end  bankers,  19. 

private  bankers,  249;  list  of,  250;  the 


principles  of  their  administra^n,  251 ;  the  oper- 
ations of  the  clearing-house,  t'6. 

•  joint-stock  banks,  259 ;  their  number,  ib., 


279;  abstract  of  their  returns  to  the  Stamp-office, 
280 ;  statement  of  their  affairs  from  their  last  re- 
ports, ib. 

and  Westminster  Bank.    Form  of  their 


circular  notes,  213 ;  list  of  foreign  bankers  who 
pay  them,  219;  its  history,  259;  its  principles, 
263 ;  its  branches,  266  ;  its  government,  263 ;  its 
paid-up  capital,  profits,  dividends,  and  surplus 
fund,  269 ;  its  prospectus,  t'6. 

-Joint-stock  Bank.    Its  formation,  270 ;  its 


capital,  profits,  dividends,  and  surplus  fund,  273 ; 
its  prospectus,  t'6. 

-  and  County  Bank.     Its  original  title,  277; 


private  banks  merged  in,  278  ;  its  prospectus,  t'6. 

-, and  Dublin  Bank.  Merged  in  the  Nation- 
al Bank  of  Ireland,  363,  372. 

I/ong  Annuity.  How  a  purchase  of,  is  passed 
through  the  books,  191. 

Lord  Bacon.  His  observation  on  reading,  writing, 
and  conversation,  applied  to  bankers,  143. 

Lost  bill  of  exchange.  What  is  the  law  respecting 
it?  34. 

Love  thy  neighbour  as  thyself.  How  can  a  banker 
do  this  ?  393 ;  not  practised  by  street  cigar-smok- 
ers, 403. 

Loyd>  Lewis.  His  evidence  upon  the  bill-circula- 
tion of  Lancashire,  40. 

Samuel  Jones.    Reply  to  his  observations 


451 


in  favor  of  the  currency  principle,  62 ;  his  liber- 
ality to  his  clerks,  33. 


McCtTLLDCH,  Mr.  His  observations  on  the  clear- 
ing, and  his  description  of  the  advantages  of  the 
clearing-house,  253. 

Mammon,  temples  of.  Buildings  of  public  compa- 
nies should  not  be  so,  423. 

Manager.  Should  be  selected  solely  on  account  of 
his  banking  talents,  105 :  should  be  characterized 
by  circumspection  and  uprightness,  t'6. ;  his  va- 
rious duties,  106;  must  not  be  engaged  in  any 
other  employment,  t'6. ;  his  conduct  towards  the 
customers,  t'6. ,  should  be  prompt  and  decided, 
107;  in  some  banks  the  administrative  power  is 
vested  solely  in  the  manager,  108,  302;  large 
banks  can  command  the  services  of  the  most  tal- 
ented manasers,  114;  should  study  his  weekly 
balance-sheet,  118;  in  1836  joint-stock  hanks 
were  formed  faster  than  good  managers  could  be 
obtained,  121  ;  his  efficiency  will  depend  on  his 
social  position,  t'6. ;  the  most  important  of  a 
manager's  functions  is  to  give  advice  to  the  di- 
rectors, 122;  evils  of  amanager  beinghadly  paid, 
124 ;  an  instance  o.f  liberal  feeling  in  the  share- 
holders of  a  joint-stock  bank  towards  their  man- 
ager, t'6. :  how  clerks  are  trained  to  become  man- 
agers, 146 ;  names  of  the  managers  of  all  the 
joint-stock  banks.  .102 ;  under  the  now  Act  a  bank 
must  have  one,  310 ;  of  branches,  1 10. 


A  Treatise  on  Hanking. 


•wMMthMM.  Sfcwld  b»  wholly  eeparau  ftmn 
thataok  ofloa,  W. 

•aarheeiar.  Ba*Ju  at,  advMcad  BMner  on  mitt*, 
Sa.114;  »a*>)  adraae**  to  *om«  of  their  own 
director*.  I  IT;  aarvteeaof  plau  were  preaeatad  to 
jjijCtor*  *aorilj  befcr*  UMtr  bank*  Mopped  pay 

ta*  Bank  oC  extract  from  lu  nr*t  r» 

port,  l«  ;*»td«»e« of  ludtr«<-u>rs  before  llH.r»r 

-y  OoeaeaHli*.  <j.j  fcMara  o<.  a. ;  had  a 

of  etoaJU  MI  Uwfaa  to  circMkuton, 


Why  7334. 
tat*  eeeret 


___  .  Jame*.  tlM  tat*  eeeretary  ^  tb* 
cial  Bank  of  Ireland.    HI*  evidence  a*  to  wh*ih 

arts*!      •'      .    !  ','.  !  Ml   PMHTM    m  OofM 

MMMMrfclw,44t  W*  evidence  M  I*  DM  for 
anatkon  and  managaejeotof  UM  Provincial  Bank 
•Tinted.  «QL 

PttUe*  of  toward*  their  MtvanU,  applied 

What  document  I*  *o  called  M82. 
•  of  agreement,  with  regard  to  •  l.«i<- 
\  of  dead*  la  a  tank  M  Mcurttjr  for  advance*, 

•nlAcM.      IMftrml  wytumt  of,  199; 
.nee  useful  M  applied  to  figure*,  200. 
Merchants.    Advantage*  to,  from  keeping  a  bank- 

er, 6;   their  book-keeping,  compared  with  the 

banker**  fcwk  keeping,  lift 
Mercury.    Tb«  god  of  merchaau  and  hankers  who 

WFM  In  public  preeaoatoa  to  hi*  temple  at  Bone 

every  year,  401 
Meriuof  cleric*.    Diflenol  way*  of  aaeertainine, 

144  ;  ehoold  influence  their  promolien,  136,  138, 

Mwpolltaa  Bank.    Woand  op,  and  lu  bod  nee* 


to  the  Union  Bank  of  London.  231 
fUpsoo*  bar*  mod  effect  on  the.  when  ad- 
••as**,  nil  In  aaaeone  of  affliction,  69;  men  of 
baetaeas  apt  to  overtook,  thoueh  among  no  claw 
are  mental  phenomena  more  itnkingly  exhiMted, 
\M :  ii«  eoenrie*  are  depraeeed  by  the  fear  of 
ceaeara.  or  the  dread  or  iwpoatibilitr,  149;  a 
emnee  of  independence  eeeantlal  to  the  full  devel- 
t  of  lu  powen,  it. ;  how  lu  faculties  are 
'  by  kindncM  and  (eneroeity,  1 1*5;  how 


t  of  their  i 

era,  O. ;  and  thoea  of  clerks,' 133, 198 ;  iu  reneral 
eohiration  render*  It*  (aeultie*  more  eflectire 
in  every  particular  application  of  them.  412; 
pobtte  compmnlea  are  triumph*  of,  ib. ;  adranu- 
f»  to  public  cooipanie*  from  ferranu  of  culti  rat- 

.   i.'. 

Mmee,  BoyaL     The  futernof  and  company  of.  re- 
>  from  UM  Bank  of  Borland.  114. 


• 

v  •-•.. 

the  mind*  of  manaren  are  influenced  by  the 
ir  aabmrtee,  it.  •  and  thoa*  of  direct 


Minors,  aaaer  twenty-one  years  of  age.    In  what 
case*  they  may  accept  bill*  of  exchange.  34. 

E  lank  at    A  branch  of  tb*  City  of  Glaagnw 
In  the  We  of  Man.  ha*  a  charter  from  t  lie 
iwnaunt  under  this  title,  »H. 
A  banker  le  a  dealer  In.  I ;  bank  a  safe 
alaee of  deposit  for,  ft;  enVt  of  iu  increase,  62, 

— orlfin  of  the  word,  S22;  applied  only  to 

cola  la  banking  book  -keep***,  186. 

book,    beecrib*  It,  169;  how  eopmeded, 


177. 

Moral  acenu.  What  coast  i  tote*  moral  agency, 
347,  413;  ate  hanking  eompanie*  moral  agent*  J 
387;  what  datte*  have  they  to  perform.)  393; 
wh»t  rtvBra  of  p*j**ttHv0M*tt  *wBowf  ihe  piHbrnv 
i  of  thew  dutie*  7  413. 


Moral  character  of  a  party.    AD  element  of  tot 

hanker1*  ««urliy.  7. 
—  fcellnf*.    Tlko  eultlratton  ot,  iuiproTt*  the 

.:r.V     :     i    ! 

MM*.    What  I*  It,  413;  abrardity  of  deny 

ln|  lu  eiteunce.  ift. 
mfluence.    Of  Nanking,  7 ;  of  ca*h  credit*, 

.,       ,,:.;..    •.     .:. 

Honi  j, 


,  Uovemor  of  the  Bank  of  England 
In  Id48.    Hi*  *vldenc*  aa  to  the  cau*e  of  the 

prrMiire  In  1*47,  (M  ;  hn  ilatenieiit  a»  to  the 
liberality  of  the  Rink  of  Kugland,  9C  ;  hi*  opin- 
jmi  w  to  the  Bank  of  Engtend  dlKounllag  for 
Country  bank*  of  tavue,  'fJ\  ;  lita  evidence  u  lo 
the  incraaa*  of  note*  rn|uirrd  for  circulation 
through  the  exclusion  of  the  Joint-Mock  bank* 
from  the  cl«aring-hou*e,  VO. 

Moeae.  Antxample  to  banker*,  15;  wa*  inxtrurl- 
ed  to  make  o*e  of  other  men.  10. ;  taught  the 
doctrine  of  national  recponaibillty,  390 ;  hi*  law 
agatrurt  muscling  the  mouth  of  it-  j  ox  that  tread- 
eth  out  the  corn,  4IU ;  caution*  the  Israelite* 
agalnM  forgetftUnee*  of  God  In  the  time  of  their 
prosperity,  4O4 ;  hi*  laws  framed  on  a  principle 
of  rtghteou*  rruliation,  430;  mad*  law*  In  favor 
of  the  poor.  404 ;  and,  moreover,  exhorted  the 
paonii  u  %..iiu.!.iri  baMfi  IHM  •'•. 

Murray.  Bobert,  chief  officer  of  the  Provincial  Bank 
of  Ireland,  ;»V1 ;  his  evidence  a*  to  one  bank  of 
lame,  37-1 ;  the  table*  be  presented  lo  '.he  Lord* 
Committee,  379. 

NAJTM  of  Ulented  men  should  not  bias  u*  In  our 
Inquirte*  after  truth,  64. 

National  Bank  of  Ireland,  3ff7 ;  extracts  from  lu 
prospectus,  i*. ;  adopted  the  local  (liareholder 
principle,  to. ;  Its  chief  connections  at  Ant  among 
th*  Repealer*,  to.  ;  look  tlie  businee*  of  the  Lon 
don  and  Dublin  Bank,  36* ;  act*  in  *ome  case* 
a*  a  saving*  bank,  ib. ;  the  last  statement  of  iu 
affairs,  ib  ;  lu  branches,  ib. 

Exchange  Company  at  Glasgow.  351. 


Nation*.  Are  moral  agenU,  390 ;  can  only  be  pun- 
ished in  their  collective  capacity  in  the  presen 
world,  412 ;  in  what  way  are  they  thus  punished 
or  rewarded  7  390 ;  the  analogy  between  nation* 
and  public  companies,  391. 

Nehemiah.  The  letters  of,  quoted  with  reference 
to  the  Act  of  1*44,  74,  76. 

New  account*.     Precaution*  In  taking,  19. 

connections.  The  beet  way  of  getting  them, 

• 

joint-stork  bank*  In  England.  Provision*  of 

the  Act  for  regulating,  303. 

Newcastle.  Bank*  at,  advanced  money  on  collier 
lee,  114:  and  U>  corn  merchants,  lie. 

New  York.  Par  of  Exchange  between,  and  Eng 
land,  1<J6 ;  an  Act  paaaed  in  that  Slate  relating  to 
banting,  440. 

Nineveh.    Jonah's  prophecy  arainst,  392. 

Northampton  Table*.  The  probability  of  life  by 
27. 

Northern  and  Ontral  Bank.  Stopped  payment  In 
rVcember,-  KM,  K> :  could  not  have  been  aselst- 
e>l  t,y  th-  Hank  of  EnrUn.l  in  1-36  had  the  Act 
of  i-ll  l.-.-n  ih«-n  in  operation,  63;  sold  their 
branch  at  Leeds  for  1  >  '•»  III:  debts  due  to 
the  bank  by  their  >'.••  wound  up,  un- 

der the  superintendence  of  the  Bank  of  England, 
-  * 

Northern  Banking  Company  at  Belfast.  Iu  origin, 
371 ;  iu  rapital,  etc..  tb. :  lu  branches,  it. 

Note  department.  What  book*  are  kept  in  the, 
164. 

register.     Dencribe  it,  164. 

Noted.  Inland  bill*  are  noted,  foreign  bill*  pr» 
UMe.1 

Nou*  of  hand.    Advance*  on,  better  than  loan* 


Alphabetical  Index. 


Notes  in  circulation.  How  entered  in  the  books 
167 ;  how  to  calculate  the  time  they  remain  ii 
circulation,  183. 

on  life,  by  J.  Taylor,  quoted  with  reference 

to  money,  13 ;  with  reference  to  loans,  25. 

Notice  of  the  dishonor  of  a  bill  of  exchange.  Wha 
it  should  import,  36 ;  who  should  give  it,  »'&. 
when  it  should  be  given,  37;  to  whom  it  shoulc 
be  given,  ib.  ;  must  it  be  in  writing?  ib. 

Notices  of  calls  on  shares.    Form  of,  216. 

Number  of  clerks.  Should  not  be  too  dispropor 
tionate  to  the  work,  145. 

of  persons  who  enter  a  bank.  How  to  as- 
certain, 199. 

of  banks  of  issue  in  the  United  Kingdom 

291. 

Numerous  banks.  Not  the  result  of  competition, 
but  of  legislation,  318. 

Nursing  an  account.     What  is  it  ?  27. 

OATH  of  secrecy.  Required  in  a  bank  deed  of  set- 
tlement, 301. 

Obedience  to  the  laws.  The  duty  of  a  public  com- 
pany, 394,  397. 

Office.  The  arrangement  of  the,  126 ;  administra. 
lion  of  the,  127;  the  arrangement  of,  with  re- 
gard to  space,  light,  and  ventilation,  ib. ;  selec- 
tion and  appointment  of  the  clerks,  129 ;  the  dis- 
tribution of  their  duties,  131 ;  the  amount  of 
their  salaries,  132 ;  the  system  of  promotion,  136  ; 
rules  of  discipline,  139;  training  of  clerks  for 
higher  offices,  144. 

One  bank  of  issue.  A  summary  of  the  author's 
evidence  respecting  its  probable  effects,  243. 

Opinion,  good,  of  their  banker,  has  been  the  means 
of  raising  people  from  obscurity  to  wealth,  7. 

Opinion  of  clerks  as  to  each  other's  qualifications 
are  generally  correct,  144. 

Order.  A  banker  should  always  observe  a  princi 
pie  of  order,  16,  117. 

PAID-UP  capital.  How  ia  this  account  kept  in  the 
books,  169. 

Palmer,  John  Horsley,  Governor  of  the  Bank  of 
England  in  1832.  His  evidence  of  the  causes  of 
the  pressure  of  1825,  53. 

Panic.  Wherein  panic  differs  from  pressure,  52, 
72,  73 ;  produces  hoarding,  73. 

Par  of  exchange.     What  is  it?  196. 

Parentage.  Of  a  candidate  for  a  clerkship,  to  be 
inquired  into,  130. 

Paris.  The  way  of  estimating  the  relative  value 
of  gold  in  Paris  and  London,  196. 

Partners.  Number  of,  in  the  joint-stock  banks  in 
England,  306 ;  in  each  of  the  Scotch  banks,  315 ; 
in  each  of  the  London  private  banks,  250;  in 
each  of  the  joint-stock  banks  in  London,  280. 

Pass-book.     Describe  it,  154,  427. 

Past-due  bills.     How  entered  in  the  books,  163. 

Patriotism.  The  duties  of,  393 ;  obedience  to  the 
laws,  394 ;  to  enforce  the  laws  upon  others,  i&. ; 
to  support  the  civil  power,  to. ;  to  encourage  the 
industry,  trade,  and  fine  arts  of  the  country,  ib. ; 
to  maintain  a  high-toned  morality,  395, 

Paul,  St.  Has  twice  quoted  the  enactment  of  Mo- 
ses against  muzzling  the  ox  that  treadeth  out  the 
corn,  and  applied  it  to  the  case  of  servants,  402. 

Payment  to  the  Bank  of  England  for  conducting 
the  public  business,  235. 

Peel's,  Sir  Robert,  Act  of  1844.  The  practical  ad- 
ministration of  a  bank  under,  61 ;  objections  to 
the  principle,  62;  the  amount  of  currency  must 
fluctuate  with  the  foreign  exchanges,  t'6. ;  and 
also  from  a  domestic  demand  for  gold,  ib. ;  a 
separation  must  take  place  between  the  banking 
and  issuing  departments  of  the  Bank  of  England, 
ib  ;  great  fluctuations  would  take  place  in  the 
orices  of  the  Government  securities,  63;  the 


453 


bank  would  be  unable  to  afford  assistance  to  the 
commercial  classes  in  seasons  of  pressure,  ib. 

Peel,  Sir  Robert,  his  examination  of  the  author  in 
the  Committee  on  Banks  of  Issue,  294. 

Penalty.  On  drawing  cheques  on  a  bank  beyond 
fifteen  miles  distant,  32  ;  on  banks  that  issue 
notes  beyond  the  authorized  amount,  286. 

Penny.  Origin  of  the  word,  224 ;  history  of  the 
penny,  ib. 

Periods  in  a  cycle  of  the  currency,  81. 

Philosophy  of  joint-stock  banking,  by  Mr.  Bell. 
Quotations  from,  102-104. 

Phrenology.  Not  necessary  to  enable  a  banker  to 
know  the  character  of  his  customers,  18. 

Pocket-money.  How  passed  through  the  bank  ac- 
count, 427. 

Political  economy  of  the  Bible,  418. 

Pollard,  George,  manager  of  the  London  Joint-stock 
Bank,  previously  chief  clerk  in  the  private  bank 
of  Messrs.  Williams,  Deacon,  &  Co.,  270. 

Population  of  the  United  States,  and  the  number  of 
banks,  442. 

Portuguese  bill.    The  form  of  one,  39. 

Poverty.  It  is  better  to  prevent  than  to  relieve, 
410;  produced  by  want  of  diligence,  injustice, 
imprudent  habits,  neglect  of  religion,  unkind- 
ness  to  the  poor,  417. 

Pound.    What  is  a  pound  ?  196,  222. 

Prayer.  It  is  the  duty  of  the  servants  of  public 
companies  to  pray  for  the  prosperity  of  the  com- 
pany whom  they  serve,  403. 

Preliminary  expenses.  How  is  this  account  kept 
in  the  hooks  ?  169. 

Presentment  of  a  bill.  For  acceptance,  32;  for 
payment,  t'6. ;  when  in  reasonable  time,  35;  for 
payment,  is  legal  at  the  clearing-house,  36 ;  should 

.   we  write  presentment  or  presentation?  1 1. 

Pressure  on  the  money  market.  Definition  of,  52, 
71 ;  preceded  by  a  low  rate  of  interest,  specula- 
tive investments,  and  an  unfavorable  course  of 
the  foreign  exchanges,  52;  the  pressure  of  1825 
was  preceded  by  a  reduction  of  interest  on  the 
public  funds,  acknowledgment  of  the  South 
American  Republic,  speculation  in  commercial 
produce  and  foreign  loans,  failure  of  the  banking- 
house  of  Sir  Peter  Pole  &  Co.,  53;  pressure  of 
1836  was  preceded  by  speculations  of  all  kinds, 
high  prices,  rejection  of  American  bills  by  the 
Bank  of  England,  reports  on  the  joint-stock 
banks,  failure  of  the  Agricultural  Bank  of  Ireland 
and  the  Northern  and  Central  Bank  of  England, 
53-55 ;  pressure  of  18:39  preceded  by  abundance 
of  money,  —  Bank  of  England  sent  gold  to  Amer- 
ica, —  importation  of  American  securities,  —  un- 
favorable harvest,  55  ;  the  Bank  of  England  ob- 
tained assistance  from  the  Bank  of  France,  56; 
comparison  between  the  pressures  of  1836  and 
of  1839,  ib. ;  pressure  of  1847  preceded  by  a  low 
rale  of  interest,  speculations  in  railways,  bad 
harvests  and  a  high  price  of  corn,  failure  of 
houses  in  the  East  and  West  India  trade,  facili- 
ties given  to  credit  by  the  Bank  of  England  and 
subsequent  restrictions,  failures  of  banks  and 
discount  brokers,  63,  64  ;  administration  of  a 
bank  in  a  season  of  pressure,  57 ;  a  banker  who 
wishes  to  be  easy  in  a  time  of  pressure  must  act 
wisely  in  the  previous  season  of  speculation,  ib. ; 
steps  to  be  adopted  on  the  approach  of  pressure, 
58 ;  in  the  pressure  a  banker  has  three  demands 
on  his  funds,  ib.  ;  means  to  be  taken  to  meet 
them,  ib.  ;  no  use  to  call  up  dead  loans,  or  at- 
tempt to  reduce  discounts,  ib. ;  a  banker  will 
have  to  give  many  refusals.  59;  should  bs  cau- 
tious in  taking  accounts  from  other  bankers,  ib. ; 
should  not  attempt  to  get  away  the  customers 
of  other  banks,  ib.  ;  how  he  should  treat  wealthy, 
but  wandering  customers,  ib. ;  how  he  should 
treat  customers  in  difficulties  who  apply,  for  as- 
sistance, 60;  whether  he  should  increase  his  al- 


A  Treatise  on  Banking. 


•-,...        .... 

"it"  p^^llm*ro*  °nh* 

pri.wn'dsclmos,  * ;  darLfUM 
'     U  pay  gnat  atuotion  to 
and  UM  dieclpUm  of  We 

i  year  I9BS.  •;  of  UM  Tear  1938,18; 
.<*  UM  year  ISM,  A. ;  of  the  year  *M7,  lu  effect 
cm  tha  circulation  of  country  banks,  894 
i  baakat«0Mia 


in  aaUclpaUsjo 
of  OM,  M;  tow  durfnf  toe,  t*. 

Pnetoa  Ba*jktaf  Company.     The  only  bank   In 
tagtaad  afcvtag  a  charter  under  the  Act 
3fe ;  a  return  of  their  MeeU  and  liabilities,  16. 

PrlvaU  amok*.  Th*  administrative  fun.  u  MM.  of 
the  several  partner*,  •  107 ;  how  prevented  in 
Scotland,  3M;  private  accounu,  who  inspecu 

-  Takinf  the  unsound  buslneas  of, 
the  cause  of  the  failun  of  some  joint  stock  banks, 
1 131 

Proceeding*  of  a  general  meeting  of  shanhoidan, 
• 

Prodi.  Th*  source  of  a  banker's,  2 ;  how  appro- 
priated, 118;  amount  of  the  London  and  West- 
mlaeter  Bank.  889;  of  the  London  Joint-stock 
Bank,  873;  of  UM  Union  Bank  of  Lm>don,  275; 
of  the  Commercial  Bank  of  U>odon,.i&. 

— —  and  loss  account  balance  sheet.    Describe 

Preota,  larps.  Baakan  mat  not  expect,  under  th* 

Pn«r»*»l*n«%*r     Describe  it,  168 ;  how  an  the 

balances  brought  oui  I  153. 
PTC  mil**     Muet  be  kept,  even  when  the  keeping 

wtwid  be  injuriou*  to  the  parties  who  made  them, 

Promotion.  Shook)  go  by  seniority,  unles*  there 
is  great  superiority  of  merit.  13d ;  ibould  not  be 
tjo  rapid,  16. 

•Property  Ha*  lu  duties  a*  well  a*  iu  rlghu,  and 
Its  rirhu  a*  well  a*  lu  duties.  406;  lu  righu  are 
the  rirst  that  an  disregarded  by  an  irreligious 
population,  16. 

Proprtetor*.  '  Procaeds&g*  of,  have  sometime*  been 
Injuriou*  to  their  bank*,  122- 124. 

•  account*.  Enumerate  those  accounu 
which  are  placed  under  this  hevl  In  the  general 
ledger,  168;  how  are  they  kepi  1  169. 

Proprietors'  ledrer.    Describe  it,  174. 

PraeacuUon.  The  Guarantee  Society  have  power 
to  pressxejty  all  parties  whose  fraud*  they  make 

I. 

of  a  new  bank.     What  It  contains, 

Acquired  by  unrighteous  mean*  is 
\'£i ;  and  i*  not  to  be  envied,  16. ;  ob- 
tained by  virtue  and  piety  should  excite  joy  and 
thanWvlng.423;  It  aflbrds  pleasure  to  God  and 

ild  examine  If  they  have 


papperiy  ducbargwl  their  moral  and  religiou*  du- 

ProvortML    Not  found  among  thooi  of  Solomon, 

417. 
Pmrtdoal.Gbrlu'  Praridont  Fund.    The  role*  of, 

Pamela!  bank  of  Ireland,  363;  Act  under  which 
it  WM  farriMd,  830;  it*  object*,  380;  *uie  of 
Unkmf  In  Jrelaod  al  the  time  of  It*  formation, 
•  cawaiUUion.  361 ;  UM  ejection  of  o«- 
con.  to  ^  the  chfjce  of  director*,  16  ;  tho  dally 
OMMriUev,  384;  UM  Inepectioo  of  branJbe*, 
38$;  UM  declantion  of  a  diridend,  i4. ;  the 
OMUM  of  lu  pro*prrhy.  388;  la*  eu 
iu  aiEun,  i*. ;  lu  btmnchoi,  16. 


I'rorl.ioo.  of  UM  Act  of  1644,  which  rofulatw  UM 

.    .    ,      ,         i-        .v     ...„.,!       . 

-• for  refuUtinf  th*  i* 


•ue  of  bank-notee  In  Inland,  33U. 

1'r.uy,  n.iii.c  l.j.     Konn  <*  letter.  900. 

I'ruileut  habiu.     A  wurce  of  wealth.  -117. 

PruMtan  coin.     E»(ll*b  DXMM*  redn 

Public  companies.  Thi*  U  the  a«e  of,  il*7 ;  are 
they  moral  agent*.  16. ;  what  are  their  ilutle*  to- 
ward* the  eUU.  303;  what  are  the  tlulle*  aritlnf 
fr.  .1.1  tltetr  metal  relation,  3M ;  what  are  their  re- 
lirii'u*  dulie*,  404 ;  what  are  their  dulte*  to- 
watd*  the  poor,  40S ;  will  they  be  re*.. 
the  performance  of  moral  and  religiou*  dutle*  7 
412;  when)  16. ;  howl  416;  In  what  manner, 
.x  luil  are  the  deduction*  from  tin*  doctrine  J 

work*  in  Scotland.    Promoted  by  mean*  of 


ca*h  cretin*,  :CM. 
Puniihment*.    How  ihould  they  be  adminUtered  ? 
160;  of  bank*,  415;  future,  414. 

QtnmnNi.    With  reference  to  the  discounting  of 
bill*,  ai. 

•,  a  aerie*  of,  on  banking  calculation*, 


am. 

Quotation*.  From  Taylor's  Note*  on  Life,  13. 86: 
Taylor**  Stateeman,  13,  104,  134;  Banker*' 
Magazine,  IS;  Eridence  given  before  Parliamen- 
tary Coramituea,  40,  888.  8M ;  Sir  W.  Clay  63; 
Report*  of  Lord*'  Committee,  63,  66 ;  Provident 
of  America,  76,  77;  Bell1*  Philowphy  of  Joint 
•t«k  Banking,  102,  KH;  Mill'*  I'.^i.V.il  Econo- 
my, 132;  Adam  Smith'*  Wealth  of  Nation*,  KU, 
Guanniee  Society'*  Pruepeclu*.  136; 
Time*  newapaper,  143.  344 ;  FoeuP*  Dcmble  En- 
try Elucidated,  120,  176;  Babbage'*  EC 
Machinery  and  Manufacture*,  175;  Kranrl*1* 
Hintory  of  the  Bank  of  England,  16.  ;  Wallace1* 
Picket  Guide  to  Commercial  Book  keepi 
Waterdon'*  O>mmercial  Dictionary,  1 
tenton'*  Manual  of  Commerce, 201,  '£U\  Notee 
of  a  Book  Worm,  222;  Rule*  of  the  Provident 
Clerk*'  Benevolent  Fund.  226 ;  the  Cambrian,  a 
Wel*h  newspaper,  238 ;  M'CuUoch'*  Commercial 
Dictionary.  258 ;  Dr.  Franklin.  6 ;  Bailey  on  the 
Law*  of  Bill*  of  Exchange,  10,  4c. ;  Chitty,  on 
ditto,  itt. ;  By  lea,  on  ditto,  36 ;  Glen,  on  ditto,  in 
Scotland,  10,  &C. ;  the  Fifth  Report  of  the  Lon- 
don and  Wertmiiwter  Bank,  2til ;  Foreign  and 
Colonial  Review,  241,  292;  Report*  of  Parlia- 
mentary Commhteee,  301,  312;  Bell'*  Letter*  to 
J.  W.  Gilban,  320,  323,  326;  Kinnear  on  Ex- 
change Companies,  318. 

RAILWAY  depoalu.  How  managed  through  the 
hanking  department  of  the  Bank  of  England, 

Railway*  have  diminUbed  the  amount  of  country 
note*  in  circulation,  293;  railway  speculator* 
are  dangerou*  customer*  to  a  bank,  1 16 ;  compa- 
nies should  not  rek'ice  when  accidenu  occur  HI,  .\ 
rival  line,  396:  have  very  property  prohibited 
•mokiiur  in  their  carriage*,  403. 

Reader'*  Time  Table*,  188. 

Baaionable  time  for  presenting  a  bill  or  cheque. 
What  i*  it ;  35. 

Receipu.  Not  uraally  given  by  London  banker*, 
l.M  ;  what  i*  the  form  of  a  (hop  receipt 

Re-discounting  of  bill*.  Advantages  and  atiuae*  of 
the  practice,  22  ;  not  don*  by  London  banker*, 
47 ;  why  not  by  the  Scotch  bank*,  3iO. 

Reduction  in  the  amount  of,  fixed  issue*  of  bank* 
since  the  paaiing  of  the  Act  of  1M4.  -jfj\. 

Refusals.  A  banker  will  have  to  give  many  In  eea- 
•on*  of  pres»ure.  59 ;  should  always  be  given 
with  courussy ,  106,  402. 


•  Another  ha*  bee*)  recently  formed.  In  London,  called  the  British  Bunk. 
l.)l 


Alphabetical  Index. 


Regulations  for  settling  the  bank  exchanges  at  Ed- 
inburgh, 314 ;  at  Dublin,  335. 

Relief  granted  to  distressed  clerks,  223. 

Religion,  pure.  What  is  it?  403;  is  the  friend  and 
guardian  of  the  poor,  407. 

Religious  duties.  The  foundation  of,  390;  public 
companies  are  bound  to. perform,  337;  what  are 
the  chief  that  devolve  upon  public  companies, 
403 ;  in  what  way  will  their  performance  be  re- 
warded, 418. 

Remittance.    Banks  of,  4. 

Reports.  Required  from  the  banks  of  New  York, 
440;  made  quarterly  to  the  Government,  441 ; 
what  it  must  contain,  id. ;  to  be  published  in  the 
local  newspaper,  ib. ;  penalty  for  non-compliance, 
441 ;  the  comptroller  may  appoint  a  competent 
person  to  examine  into  the  affairs  of  any  bank, 
ib. ;  the  capital  of  banks  subject  to  taxation,  ib. ; 
table  of  all  the  banks  in  the  States,  412. 

Reproofs.    How  should  they  be  administered,  150. 

Requisition  Notes.    Forms  of,  213. 

Reserves  of  bankers.  In  what  should  they  be  held, 
44  ?  of  the  Bank  of  England,  89. 

Respectability.  A  banker  is  a  referee  as  to  the  re- 
spectability of  his  customers,  6. 

Responsibility,  national.  The  doctrine  of,  taught 
by  Moses,  390;  proved  by  history,  391;  is  not 
destructive  of  personal  responsibility,  ib. ;  of  in- 
dividuals connected  with  public  companies, 
393. 

Restrictions.  On  the  issue  of  the  country  banks, 
70 ;  on  the  banks  of  Scotland,  ib. ;  and  of  Ire- 
land, id. 

Retaliation.  A  principle  of  righteous  retaliation  is 
tha  prevailing  principle  of  the  Divine  govern- 
ment, 410;  is  the  principle  of  the  Mosaic  law, 
id. ;  recognized  in  the  denunciations  of  the 
pnphftU,  ib. ;  illustrated  by  historical  facts,  420 ; 
is  agreeiMe  to  the  feelings  of  human  nature,  ib. 

Retired.  When  is  a  cheque  or  note  said  to  be  so? 
154. 

Returns.  All  banks  to  mike  a  return  to  the  stamp 
office  of  the  names  of  their  partners,  on  the 
first  day  of  January  in  each  year,  or  within 
fifteen  days  afterwards ;  the  commissioners 
shall  publish  their  names  in  some  local  news- 
paper before  the  first  day  of  March  following, 
249;  monthly  returns  of  the  assets  and  liabilities 
required  under  the  new  Act,  309. 

Rewards  and  punishments.  Essential  to  moral 
agency,  412;  wJv.n  bestowed  on  public  compa- 
nies, ib.  ;  what  is  their  nature,  415 ;  in  what 
manner  are  they  bestowed?  418;  what  effects 
should  they  produce  ?  424. 

Rich  men.  Advances  to,  sometimes  become  dead 
loans,  23. 

Righteousness  in  dealing.  A  source  of  wealth, 
417. 

Rights  of  property.  Are  as  sacred  as  any  other 
rights,  405. 

.  gocial.  Divided  into  perfect  and  imperfect, 

406. 

Rivalry  between  bankers.  Injurious,  123;  not  ad- 
visible  in  seasons  of  pressure.  59. 

Rogera's  Chapters  on  Country  Banking.  A  useful 
work,  203. 

Rome.  In  ancient,  the  merchants  and  bankers  had 
an  annual  procession  to  the  temple  of  Mercury . 
404. 

Royal  Bank  of  Ireland.  Its  formation,  371 ;  the 
last  statement  of  its  affairs,  ib. 

-Exchange.  Exhibits  the  religious  mottoes 

of  the  City  of  London  and  the  Mercers'  Com- 
pany, 401. 

Rules  of  discipline  In  a  bank,  139. 

Rumors  are  rif.j  in  seasons  of  pressure,  59 ;  a  bank- 


er should  not  occasion,  (i! . 


SABBATH-DAT.    The  duty  of  public  companies  to 

reverence,  406 ;    its  design,   ib. ;    its   abolition 

would  be  injurious  to  the  poor,  407. 
Salaries.     Of   clerks,    rules    respecting,  132 ;    of 

managers,  124;  of  directors,  125. 
Sanderson  &  Co.,  bill-brokers.    Stopped  payment 

through  the  failure  of  Lesley,  Alexander,  &  Co., 

corn  merchants.  116. 
Savings  banks.     In  what  cases  money  should  be 

placed  there,  430. 

St.  Clement  Danes.    Terms  for 


granting  annuities,  230;  the  National  Bank  of 
Ireland  acts  as  one,  363. 

Scale  of  salaries.     Desirable,  133. 

Scrimgeour,  William  Wilson.  General  manager  of 
the  Union  Bank  of  London,  previously  a  chief 
officer  in  the  discount  department  of  the  Bank  uf 
England,  274. 

Scotch  banks.  Their  investments  in  Government 
securities,  44, 46. 

Scotland.  Principles  of  banking  in,  3 ;  bills  drawn 
from,  regarded  as  foreign,  31. 

the  laws  of,  with  reference  to  banking. 

311;  the  existing  banks  of,  314;  comparison  be- 
tween the  banks  of  Scotland  and  those  of  Eng- 
land, 319 ;  the  laws  of  the  currency  in  Scotland, 
327;  its  cash  credit  system,  332;  its  deposit 
system,  336 ;  remittances  to  India,  340 ;  regula- 
tions for  settling  the  exchanges,  344 ;  exchange 
banks  and  exchange  companies,  346 ;  different 
effects  of  the  Bank  Acts  of  1845  in  Ireland  ami 
in  Scotland,  353,  379 ;  keeping  a  banker  more 
general  in  Scotland  than  in  England,  325,  426. 
•  banks  in  List  of  those  in  existence  in 


1326,314;  of  those  formed  since,  ib.;  of  those 
now  in  existence,  315 ;  of  the  changes  that  have 
taken  place,   316 ;   of  those  that  have  failed  or 
wound  up,  313 ;  of  the  nine  that  remain,  ib. 
of  those  in  Edinburgh,  319;  of  those   in  Glas- 

f)w,  ib. ;  difference  between  Scotch  banks  and 
nglish  banks,  ib. ;  capital  of  all  the  banks  in 
Scotland,  321. 

•  branch  banks  in.    Number  of,  291 ;  more 


general  in  Scotland  than  in  England,  319;  aver- 
age amount  of  capital  and  of  circulation  to  each 
branch,  321 ;  branch  system  leads  to  uniformity 
in  charges  all  over  Scotland,  322;  branches  of 
the  Edinburgh  banks  have  been  opposed  and 
sometimes  defeated  by  the  local  banks,  323; 
branches  enable  the  bank  to  avoid  re-discount. 
ib. ;  produce  uniformity  in  the  mode  of  making 
the  exchanges,  ib. ;  enable  the  large  banks  to 
exercise  a  surveillance  over  the  small  ones,  326 : 
the  number  of  would  be  diminished  if  the  notes 
under  £.5  were  abolished.  331. 

Scripture.  Proves  that  relations  imply  correspond- 
in?  duties,  333;  proves  national  responsibility. 
390 ;  family  responsibility,  331 ;  collective  re- 
sponsibility of  cities,  392;  status  the  principles 
of  social  duties,  395;  denounces  tho-<;  who  vio- 
late the  Sabbath-day,  406 ;  enforces  the  duty  of 
benevolence  to  the  poor,  403;  gives  this  rule  for 
exercising  it,  409;  concurs  with  reason  in  reganl 
to  a  future  judgment,  414;  all  its  threalenirigs 
against  public  bodies  of  men  have  reference  to 
the  present  world,  415 ;  do  not  teach  that  wealth 
H  an  evil,  ib.  ;  nor  that  its  enjoyments  are  sin- 
ful, 416;  promises  wealth  as  a  reward  to  the 
pious  and  the  virtuous,  t&. ;  specifies  the  vir- 
tues which  are  followed  by  wealth,  417;  de- 
clares the  doctrine  of  a  righteous  retribution  in 
the  present  world,  419. 

Seasons  of  pressure.    Characteristics  of,  53. 


of  speculation, 
in  them,  57. 


How  a  banker  should  act 


Securities.     A  banker  will  probably  have  to  realize 

some  in  seasons  of  pressure,  58. 

for  clerks,  135 ;  Guarantee  Societies,  ib. 

Secrecy.  -.On  llie  part  of  directors  and  clerks  en- 


455 


A  Treat  tie  on  Banking. 


to  doade  Of  MUltfMnl.  301  ;  fcra  Of  a 

" 


.  Bankers  ehmild  conduct  their 

*•**•  oo  a  •riacipl*  o&  78  :  afcmtd  not  depart  OQ 
itiT  ftitnlr  -Mh^ferilfT  r-  '—  —  h  ----  ' 
pr*«*up».  T9.  •*  on  bUl-brukera,  •*.;«*  on  oth 


-  knowledge.    Necoaearytoa  banker,  II 
Senwnty.    Should  be  observed  la  the  promotion  of 

clerk*.  »nl*ea  there  u»  special  reason*  for  the 
contrary,  138. 

Sarraau.  He  who  ke«*»  a  banker  need  not  trait 
bts  money  to  hi*  MmnU.  3;  dulie*  of  bank*  to- 
ward*.  401  ;  duty  of  earvanu  lowanl*  the  lank. 
*M:  MlvaaUff**  of  religious  one*,  41  1  ;  ailvan 
Ufo  to  a  tank  of  educated  onea,  41*. 

-  of  bank*  and  other  public  companle*. 
Wlul  are  their  dutioaf  404 

SharebuMer'*  regieter.    Daaerth*  It,  171. 

-  liT  Joint-Mock  banks.    Art  liable  to 
th*  full  extent  of  their  property  for  all  the  debt* 
of  UM  bank.  963,  300;  ib*  cam*  under  the  now 
charter*,  310;  the  earoe  in  Scotland.  311,  310; 
asjd  In  Inland.  367;  they  chiioM  the  director... 
301  ;    can    diianire    the    company,    id  ;    hare 
•••mime*  acud  unwisely,  123;  th«ir  conduct 
toward*  the  servants  of  the  bank,  400. 

i  in  bank.    Under  the  new  Act  cannot  be  lee* 


than  £100,  308;  amount  of  In  (he  joint -stock 
hack*  of  London,  890:  of  the  bank*  or  Scotland 
i  the  bank*  at  Beltut.  371 ;  bank*  f-nn-,1 
r  the  new  Act  nut  mltowed  to  purcbaee  or 
i  advance*  oo  their  own  *hare*.  306 ;  exist- 
ing  bank*  not  thue  restricted,  301 ;  pricee  of 
aftMra*  in  UM  baoka  of  Scotland.  315. 

-  in  public  companies.      Advance*   on  by 
banker*,  become  dead  loan*.  94. 


Tba  origin  of  the  word,  283. 

signature  book.     Describe  n 

Silver.    It*  specific  gravity.  196;  bow  coined,  »'&. 

Sin.    Tba  baeeuing.  13.  124. 

Singing.  In  moderation,  nod  for  the  health  of 
bank  clerks,  111. 

Single  entry.  Wherein  doe*  it  differ  from  double 
entry,  Ira. 

Singular.  I*  th*  word  "bank"  aingular  or  plu- 
ral >  - 

Situation-book  for  clerk*.    Where  I*  one  kept  ?  229. 

Small  bank*.  The  evil  of,  103;  the  result  of  legis- 
lation. 31 S,  379. 

SokM,  Alfred.  The  surgeon  of  the  Bank  of  Eng- 
land. 141. 

William  Raa.     Hi*  Improvement*  In  the 
book-keeping  of  the  Bank  of  England.  I" 

Smith,  Adam.  Hi*  observation*  on  wage*,  132; 
on  the  dirieion  of  labor.  1 7.Y 

fl*aofctog.  In  UM  atraat  and  in  place*  of  public  re- 
eon,  la  Improper.  404. 

Smuggling.  In  what  case*  a  *muggling  considera- 
tion Titbit**  a  bill  of  exchange,  33. 

Social  duties  396;  apeak  ye  every  man  the  truth, 
to  ;  ye  shall  not  Meal,  nor  deal  falsely,  ib.  :  let 
not  wickedness)  dwell  in  thy  tabernacle*.  396; 
apeak  not  evil  one  of  another,  397 ;  meddle  not 
with  them  which  are  given  to  change,  ib. ;  lore 
thy  neighbour  a*  thyself,  393;  if  thine  enemy 
be  wanfry.  feed  him,  ib. ;  do  what  la  just  though 
tb*  law  ipay  not  require  it.  ib. ;  be  all  of  one 
mind,  phiful,  courteous,  400;  use  hospitality. 
401 ;  nppre**  not  a  stranger,  i*. ;  give  to  your  *er- 
real*  what  i*  Jvst  and  eotial,  to  ;  earvanu,  be 
obaiBaa*  to  your  neater*.  408;  visit  the  fathertea* 
and  widow*  to  their  affliction,  403;  do  good  unto 
, 

pnehton.    Tha  eflWancy  of  a  manager  will 
ad  •pan.  121 :  those  who  ' 


have  risen  In  tha 

I  entertain  kind  feeling*  toward*  the 
claw  from  whence  they  bar*  *pnuig,  401 ;  social 
in*  aaMOf  tie*  Hebsawa,  403 

456 


Social  relation*  Are  tba  fbondatloa  of  eoelal  <h> 
Ue*.  »t* :  public  companie*  are  capable  of  aua- 
Ulnlng.  10. 

8otarai|nty  of  th*  Dirlne  proceodinga,  4!B. 
Space.    Au  iiii|Nirtan(  i  "iiMiler«iiiw  In  tba  eon- 

•traction  of  a  l>u>k,  I'Z7. 
SpanMh  MIL    Th*  form  of  one,  39. 
Special  contract*.  Form*  of,  need  prongm  to  1844, 

when  a  tmnklng  company  could  not  ra*  by  It* 

PUUIC  officer,  are. 

Speculation,  reck  lew.  Ha*  been  the  ruin  of  compa- 
ny a*  wall  a*  of  Individual*,  397. 

Speculation*.  Are  produced  by  a  low  rate  of  inlet 
art,  53 ;  are  the  precuraor*  of  pmeure,  57. 

Speculative  cuitonter*.     Troubleaoni*  to  banker*, 

InreetmonU.    Uiually  precede  a  aea- 


•on  of  preaMire,  53. 

si«ni|nltii»  on  note*.  How  to  calculate  the  compo- 
sition .1  !•»•< 

S»«ni|x.  On  bill*  of  exchange,  33 ;  on  recelpta  on 
tratwfer  of  •hare*.  172;  on  bank  note*,  2S4. 

Slate.  Dutieeof  public  companlee  toward*  the,  80S. 

Statement- h»k.  A  prlntrd  collection  of  the  week- 
ly •talemenl*  of  the  affair*  of  a  bank  bound  to- 
gether, I*  *o  called.  173,  433. 

Statesman,  the,  by  Mr.  Taylor.  Quotation*  from, 
on  decleion,  13 ;  on  making  u*e  of  other  men,  IS ; 
on  the  age  of  member*  of  public  board*,  104  ;  on 
the  union  of  wiwlom  and  goodne**,  131  ;  on  the 
aalario*  of  clerk*,  134;  on  the  rule*  of  promotion, 
13S. 

Stationery.  In  a  bank,  U  under  the  care  of  the  chief 
Clerk,  140. 

St.  Marvlebone  Bank.  Wound  up,  and  It*  burinee* 
lran*fciT*dtothe  London  and  Westminster  Kink, 
H 

Stewart.  P.  M.,  M  r.  Letter  from  the  author  to, 
on  the  exchange  bank*,  346. 

Stock  book.    Describe  It,  183. 

broker*'  chnrce*,  191. 

Kxchange.  Explanation  of  It*  operation*. 

49 ;  bankers'  loan*  there.  60 ;  the  Dublin,  333. 

jobber*.  Wherein  different  from  Block- 
broker 

purchase  of.    How  to  calculate,  191. 

receipt.    Form  of  one,  49. 

Stolen  note,  or  bill  of  exchange.  The  law  respect- 
ii.e.31. 

.Slrataii.  Jame*.  Has  familiarly  described  the  op- 
<  of  country  hanking.  426. 

Stuckey,  Vincent,  the  late.    His  opinion  on  invest- 

Supplpineiiiirv-waate-boote.    Describe  them.  179. 

>i.r|i:u»  fund.  a.  The  nature  of,  112;  how  appro- 
priated, ib  :  the  advantage*  of,  113;  how  kept  In 
the  book*,  109 ;  amount  of  among  the  joinl-btock 
banks.  3U3-306. 

fund*.    Adminictratlon  of  a  bank  with  re- 
tard to  th*  employment  of,  41. 

•noftheActof  1»M4.     Waa  it*  condemna- 
tion. TO;  may  be  suspended  again,  76. 

Swedish  bill.    The  form  of  one.  '39. 

System.  A  want  of.  has  canwd  the  ruin  of  *ome 
banka,  117 ;  a  banker  should  observe,  16. 

TABLB.  Showing  the  number  of  day*  the  different 
denomination  of  note*  remain  inciroBlailo*7189; 
showing  the  relative  value  of  gold  in  London, 
Part*,  Hamburgh,  and  Amsterdam,  221  ;  table  of 
Kiiirlish  money  reduced  Into  loreiipi.  222;  table 
of  the  term*  on  which  government  annuities  are 
granted  for  £33  and  under.  230;  comparative 
view  of  the  expectation  of  tile  according  to  dif- 
ferent table*  at  mortality.  231.;  of  the  rirrulalion 
of  note*,  by  the  branches  of  the  Bank  of  England, 
239:  ditto,  of  draft*,  ib. :  amount  oftfWMKllOM 
In  the  clearing.  86*,  257;  rjipit.il  profit 
dei uis,  and  mirpliM  fund  of  the  London  and  West- 


Alphabetical  Index. 


minster  Bank,  269;  ditto,  of  the  London  Joint- 
stock  Bank,  273 ;  ditto  of  the  Union  Bank  of  Lon- 
don, 275 ;  ditto  of  the  Commercial  Bank  of  London, 
ib. ;  of  the  affairs  of  all  the  London  joint-stock 
banks.  280 ;  of  stamp-duties  on  country  notes, 
281 ;  reduction  of  the  fixed  issue  of  notes  in  Eng- 
land, 291 ;  circulation  of  the  private  and  joint- 
stock  banks  from  1845  to  1843,  294;  of  all  the 
country  joint-stock  banks  in  England,  302 ;  the 
joint-stock  banks  that  have  stopped,  305 ;  those 
that  have  wound  up,  306 ;  those  that  have  stopped 
and  resumed,  307;  those  that  have  merged  in 
other  banks,  ib. ;  banks  of  Scotland  in  1826, 
314;  banks  since  formed,  ib. ;  existing  banks  in 
Scotland,  315 ;  changes  in  Scotch  banks,  ib. ; 
circulation  of  notes  in  Scotland,  1834  to  1839, 
327  ;  ditto  in  1846  to  1848,  ib. ;  notes  and  gold, 
1842  to  184?,  323  ;  circulation  of  each  bank  during 
1848,  329 ;  ditto  in  March  1849,  330 ;  of  the  banks 
of  Belfast,  371 ;  circulation  of  notes  in  Ireland, 
373 ;  returns  from  the  banks  of  issue  in  Ireland, 
379  ;  circulation  and  coin  in  Ireland,  t'6. 

Taking  accounts  from  other  banks,  19,  59. 

Talents,  banking.  As  rare  and  as  important  as 
those  necessary  to  obtain  eminence  in  any  other 
pursuit,  13. 

Taxes.  On  the  transfer  of  property,  are  pernicious, 
348 ;  restrictions  on  banks  are  taxes  on  the  pub- 
lic, 328. 

Taylor's  Notes  on  Life.  Quotation  from,  on  mon- 
ey, 13 ;  respecting  loans,  25. 

Statesman,  quoted.  On  decisiveness,  13; 

on  the  choice  of  instruments,  14  ;  the  correspond- 
ence between  goodness  and  wisdom,  131 ;  on  the 
salaries  of  clerks,  134;  on  the  promotion  of 
clerks,  138. 

Teller's  department  in  a  bank,  136. 

Temper,  hasty.  A  defect  in  a  banker,  13 ;  is  tried 
by  being  kept  waiting  a  long  time  at  a  banker's 
counter,  128. 

Terms.    Used  in  book-keeping,  154. 

Tester,  an  old  coin.    Why  so  called,  223. 

Testimonials.  To  be  received  with  caution,  131 ; 
may  be  negatively  useful,  ib. 

Till.  The  amount  of  cash  a  banker  keeps  in  his  till, 
how  regulated,  42. 

Time.  A  banker  should  know  how  to  economize, 
15 ;  modes  of  doing  this,  16 ;  time  saved  in  keep- 
ing a  banker,  426. 

•  bargains  on  the  stock  exchange  explained, 

•  is  saved.    By  the  employment  of  assistants, 
15 ;  by  methodical  habits,  16 ;  by  the  shortening 
of  interviews,  ib. ;  by  a  banker  having  general 
principles,  18. 

Tipperary  Joint-stock  bank,  372;  its  arrangement 
with  the  Bank  of  Ireland,  ib. ;  its  branches,  373. 

Tradesman.    Saves  trouble  in  keeping  a  banker,  5. 

Training.  Of  clerks  for  higher  offices,  144;  their 
number  should  be  proportionate  to  their  work, 
145  ;  their  labor  should  be  so  apportioned  as  that 
each  office  should  be  a  training  for  the  one  above 
it,  ib. ;  they  should  have  reasonable  holidays, 
when  the  junior  should  do  the  work  of  his  sen- 
ior, 145 ;  they  should  all  be  exercised  at  the  daily 
balance,  146;  those  in  training  for  managers 
should  be  assigned  those  duties  which  are  the 
most  intellectual,  146 ;  should  not  receive  too 
many  minute  instructions,  148. 

Transfer  of  stock,  191 ;  in  Ireland,  383. 

register.  Describe  it,  172;  deed  of  trans- 
fer, form  of,  154. 

Transmission  of  money.    Effected  by  banks,  4, 284. 


50. 


Travellers,  commercial.    Derive  advantages  from 

bank*,  6. 

Trial  paper.    What  is  it?  170. 
Troy  weisht.    Gold  and  silver  weighed  by,  195. 
Truth.     Cases  in  which  public  companies  should 
here  to,  3'JV 

MM 


tion,    371 ;    statement  of  its  affairs,   ib.  ;  and 

branches,  ib. 
Uncharitable.    Public  companies  should  not  be  so 

in  their  judgment  of  each  other,  421. 
Union  Bank  of  London.     Its  formation,  274;  its 

capital,  profits,  dividends,  and  surplus  fund,  275: 

its  prospectus,  «6. 
Union  Guarantee  and  Life  Assurance  Company, 


135. 


•  Exchange  Company,  Glasgow,  351. 


United  States  of  America.  Their  population,  anJ 
the  number,  capital,  and  circulation  of  all  ttieir 
banks,  450.  See  America. 

Universality,  a  moral.  Differs  from  one  that  ia 
metaphysical  or  physical,  413. 

Unjust  charges  against  banks  of  issue.  Prevented 
by  the  act  of  1844,288. 

Unpaid-list.    Describe  the  book  so  called,  160. 

Unsanctified  property.  la  transient,  and  is  not  to 
be  envied,  422,  423. 

Unsuccessful  companies.  Should  inquire  if  they 
have  properly  discharged  their  moral  and  religious 
duties,  423. 

Usury.  In  what  cases  a  usurious  consideration  viti- 
ates a  bill  of  exchange,  33 ;  present  laws  of  usury, 
ib, 

Utility  of  banking.  Banks  are  places  of  security 
for  money,  3 ;  interest  allowed  on  deposits,  ib. ; 
make  advances  to  people  who  want  to  borrow,  4 ; 
transmit  money  from  one  part  of  the  country  to 
another,  ib. ;  supply  the  kind  of  currency  that  is 
required,  4 ;  there  is  a  great  saving  of  time  in 
money  transactions,  5;  saves  expense  to  mer- 
chants and  others  who  keep  bankers,  ib. ;  are  ref- 
erees as  to  respectability,  6;  are  a  means  of  ob- 
taining information  about  parties,  ib. ;  supply  a 
record  of  annual  expenditures,  6;  are  a  secure 
place  of  deposit  for  deeds,  papers,  or  other  prop- 
erty, 7;  means  of  obtaining  useful  information  as 
to  monetary  transactions,  ib. ;  have  a  powerful  in- 
fluence on  the  nvirals  of  society,  7. 

VENTILATION.  An  important  consideration  in  the 
construction  of  a  bank,  127. 

Virtue.    Always  associated  with  wisdom,  131. 

Virtues,  commercial.  Bankers  are  the  public  con- 
servators of,  7 ;  virtues  that  produce  wealth,  41€. 

WAOES.  Those  who  pay,  derive  advantages  from 
ciunks,  5 ;  laws  by  which  they  are  governed,  132. 

Waste-books.  Received-Waste-Book,  describe  it, 
155 ;  who  keeps  this  book  ?  156 ;  how  do  you  en- 
ter Bank  of  England  notes  ?  cheques  1  country 
notes  and  coins?  155;  how  is  it  ruled  in  the  hori- 
zontal system,  and  how  does  it  check  itself?  176. 
Paid- Waste-Book.  How  is  it  ruled  ?  156 ;  when  a 
cheque  is  paid,  how  do  you  make  the  entry  ?  ib. ; 
how  is  this  book  ruled  in  the  horizontal  system? 
177;  how  will  it  check  itself?  178.  Merchants' 
Waste-Book,  180. 

Waterston's  Commercial  Dictionary  quoted,  192; 
his  Compendium  of  Commerce  referred  to,  201, 
222. 

Wealth.  Is  a  blessing,  415 :  its  enjoyments  not  sin- 
ful, 416;  the  means  of  obtaining,  ib.;  ill-gotten, 
is  soon  lost,  422. 

Weekly-balance,    describe  it,  170. 

returns,  under  the  Act  of  1844,  97. 

Weighing  sovereigns.    Troublesome,  5. 

West  of  Scotland  Exchange  Investment  Company, 
331. 

Westminster  Review  of  January,  1841.    An  article 


written  by  the  author  published  in,  62.    See  Cur- 
rency and  Banking. 

Widows.  Public  companies  should  have  funds  for 
relieving,  403;  mining  and  railway  companies 
should  relieve  those  whose  husbands  have  tweu 
killed  in  their  works,  Hi. ' 

457 


A  Tnatitf  on  &inkiny. 


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IJ.    lmplh»  pn«d»n.^    an.)   .U«-rri,n.   14;    U. 

b*«rk*A  unto  coonwl.  a  proof  of,  434. 
WUrlr  to  art.  Mondlfflrult  to  a  l«nk«>r  In  •  w*«on 
an  In  a  mtfon  of  prt^ura,  67 


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Writer.    A  rntl  on*  nbuuU  b*  appoint^  to  «  rlto 
up  the  etwtOBMV^i  book*,  143. 

Writing  wall.    Importone*  at,  161. 

Their  motto  of  tMohlnf,  161. 


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